Hong Kong's monetary base dipped to HK$1.230b

All eyes now on FOMC meeting.

According to CCB International, the HKMA’s aggregate balance remained stable at HK$164b this week (ended 26 July 2013) while Hong Kong’s monetary base declined slightly, by HK$0.2b over the past week to reach HK$1,230b. Hong Kong’s 10-year treasury yield increased to 2.51% by the end of last week, up from 2.36% the week before.

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Fund inflows to Hong Kong market rose. EPFR’s weekly report showed fund outflows from China’s equity market continued, moving from a net outflow of US$520m last week to a US$38m net outflow this week.

Fund inflows to Hong Kong rose to US$96m this week (ended 24 July) from a net inflow of US$37m the week prior. Fund inflows to the US equity market reached US$47b for the past four weeks.

Market focus on FOMC meeting on 30-31 July. US economic data sent out mixed signals. In our view, the only clear determinant of the direction of QE would be meaningful improvement in the US job market.

For now, the market expects no change in the size of asset purchases following the FOMC meeting. Unfavourable HSBC flash PMI in China indicates a sustained slowdown in manufacturing activities in 3Q13. In the short term at least, global investors are likely to favor the US and Japanese equity markets.