08.27.2001
Liquidity conditions looking up

• Development: M2 expanded 6.3% in July, while M1b contraction slowed down to 2.7%, after bottoming in April with a decline of 6.8%. M1a fell 6.0% in July following June’s 6.8% drop.

• Analysis: In previous cycles, growth differential in money supply (M1% - M2%) bottomed at -11 percentage points. In the current cycle, April saw a trough with -11.9 percentage points.

• Primasia View: Liquidity growth should pick-up momentum in 4Q01 once stability returns in the NT$ and the economy. Build-up in foreign currency deposits, which are included in M2 but not M1b, results in a decline in M1b.