System loans slightly budge 0.01% m/m in August

Loans for use outside Hong Kong increased, meanwhile.

Data from the HKMA's August monetary statistics revealed that system loans only grew 0.01% m/m for that month following July's performance, which recorded an increase of 1.0%.

According to a research note from Barclays, meanwhile, loans for use outside Hong Kong were up 1% m/m.

However, the report noted that the growth was offset by trade finance loans (-0.6% m/m) and loans for use in Hong Kong (-0.4% m/m).

Here's more from Barclays:

The system loan to deposit ratio was flat at 72.5%. We expect loans for use outside Hong Kong to continue to grow at a low pace because banks are getting more cautious on the slower economic growth in China and need to manage their risk.

Funding costs likely to trend lower: The composite interest rate, which is a measure of the system funding costs, dropped 3bp m/m to 42bp as deposit competition eased.

Funding costs are likely to stabilize in the coming months given sufficient liquidity in the system.