THE RATES OF RETURN ON DEPOSITS, GOLD AND STOCKS

IN HONG KONG

AN EMPIRICAL STUDY

by

YUNG KIT-LIN

BENJAMIN CHAN HING-TIM

容 潔 蓮

RESEARCH REPORT

Presented to

Professor Edward J. Schmidlein

In Partial Fulfilment

of the Requirements for the Degree of

MASTER OF BUSINESS ADMINISTRATION

THE THREE-YEAR MBA PROGRAM

THE CHINESE UNIVERSITY OF HONG KONG

May 1982

陳 慶 添

2

ABSTRACT

This paper explores the relationship among the rates or return

on three investment alternatives in Hong Kong, namely, savings

deposits, gold and stocks over a ten-year period from 1972 to 1981.

The writers distinguish between the Buy and Hold behaviour

which applies to less active investors and Systematic Speculation

which refers to active investors. Two different sets of input

computed from the same basic data are used for the two series of

analuyses.

The Buy and Hold analyses try to explore the relationship

among the rates of return on savings deposits, gold and stocks.

The Systematic Speculation analyses attempt to explore the

relationship between the return on gold and on stocks. Regression

analyses are used.

It is found that under Buy and Hold, the relationship between

stock yield and savirxxsyield, between stock yield and gold yield

and between gold yield and savings yield are very weak. The

multiple regression analyses also illustrate a weak relationship

between stock yield versus savings yield and gold yield, though

the correlation coefficients improve considerably over those of

simple regression. Under Systematic Speculation the relationship

between the month-end values of gold prices and stocks is also

found to be weak.

An attempt was made to analyse and interpret the tindings,

as well as to account for the various weak relationships.

TABLE OF CONTENTS

ABSTRACT

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

Chapter

INTRODUCTION

Purpose of study

Investment Alternatives in Hong Kong

Deposits

Commercial Banks

Deposit-Taking Companies

Traditional Private Chit-Funds

Credit Unions

Gold

Gold Coins

Bonds and Stocks

The Stock Market, 1972-1981

Other Investment Alternatives

Real Estate

Precious Stones and Others

Scope and Limitation of Study

Return on Savings Deposits, Gold and Stocks

II METHODOLOGY

Basic Data

Return on Savings Deposits

Return on Gold

Return on Stocks

Hang Seng Index

Input and Analyses Used

First Series of Analyses : Buy and Hold

Second Series of Analyses :Systematic Speculation

Systematic Speculation

Input under Buy and Hold

Analyses Used under Buy and Hold

Simple Regression Analyses

Multiple Regression Analyses

Input under Systematic Speculation

Analyses Used under Systematic Speculation

III FINDINGS

Findings under Buy and Hold

ii

vi

1

1

1

1

1

2

4

5

5

6

8

11

12

12

13

14

14

16

16

16

16

16

16

18

18

19

19

20

21

21

22

22

23

24

24

Simple Regression Analyses

Multiple Regression Analyses

Average Return per Period for 103 Periods

Findings under Systematic Speculation

Other Findings

IV ANALYSES AND INTERPRETATION

Under Buy and Hold

Simple Regression Analyses (1), (2) and (3)

Simple Regression Analyses (4)

Simple Regression Analyses (5), (6) and (7)

Multiple Regression Analyses (8), (9) and (10)

Under Systematic Speculation

V SUMMARY AND CONCLUSIONS

Delimitation

Methodology

Findings

Analyses and Interpretation

Conclusions

Suggestion for Further Study

APPENDIX

I (a) Savings Deposits and Per Capita Savings Deposits

(b) A Record of Bank Runs 'in Hong Kong

(c) Stock Turnover

II HANG SENG INDEX

(a) Computation Method of Hang Seng Index

(b) Constituent Stocks of Hang Seng Index

III BASIC DATA

(a) Interest Rates Paid by Principal Banks

(b) Daily Closing Gold Price

(c) Daily Closing Hang Seng Index

IV BUY AND HOLD

(a) Rates of Return (%p.m)

(b) Correlation Coefficients and F-values

(c) F-tests on Buy and Hold

V SYSTEMATIC SPECULATION

(a) Flowchart for Systematic Speculation

(b) Comparison Summary : Gold

(c) Comparison Summary : Stocks

(d) Gold Investment : Buy & Hold versus Systematic

Speculation

(e) Stocks Investment : Buy & Hold versus Systematic

Speculation

(f) Month-end Values (HK$) of Gold Investment

(g) Month-end Values (HK$) of Stock Investment

24

25

25

25

26

28

28

28

28

29

29

31

32

33

33

34

35

35

36

37

37

38

39

40

41

44

45

46

47

57

67

68

70

72

73

74

77

78

79

83

87

91

BIBLIOGRAPHY 95

6

ACKNOWLEDGEMENT

The writers wish to express their sincere gratitude to their

supervisor, Professor Edward J. Schmidlein of the Three-year MBA

Program of the Chinese University of Hong Kong, for his support

and advice throughout the research project.

The writers would also like to thank Mr. Lamp Li of the

Lingnan Institute of Business Administration of the Chinese

University of Hong Kong for his valuable comments on the method•

ology of this paper and Mr. Roger K.H. Luk of Hang Seng Bank

Research Department for supplying data on the stock market and

finally Mrs. Mariana Y.K. Wong for typing the script.

Yung Kit-LinHong Kong

Benjamin Chan Hing-TimApril 1982

1

CHAPTER ONE

INTRODUCTION

Purpose of Study

The purpose of this study is to explore the relationships,

if any, among the rates of return in Hong Kong on three investment

alternatives over the 10-year period from 1972 to 1981. The three

investment alternatives studied are savings deposits, gold and

stocks.

Investment Alternatives in Hong Kong

In Hong Kong, investment opportunities are numerous. The

following sections attempt to review the common ones.

Deposits

Money can be'deposited with commercial banks, deposit-taking

companies, traditional private chit-funds (known in Chinese as i-

and credit unions.hui義 會 ）

Commercial Banks

The commercial banks in Hong Kong provide the most important

channel for deposits. This is illustrated by Appendix I(a) which

sets out, year by year, the total savings deposits with the com-

mercial banks as well as the per capita savings deposits in Hong

Kong since 1954.

Under the present tianKing urainance, only licensed commercial

banks are allowed to accept "sight deposits" (i.e. current accounts

subject. to chuqucs and savings accounts) as well as time

of vauious maturities.

It is ocnerally assumed that putting money on deposit with a

bank is safe. However, the banking history of Hong Kong reveals

that depositors' confidence in the commercial banks was shaken by

several bank runs. Appendix I(b) gives an account of all the bank

runs in Hong Kong since 1866. Despite the fact that there were

serious bank crises, depositors' confidence in the commercial banks

has been restored since 1965. This is due to the effort on the

part of the banks to strengthen management and to more sophisticated

banking legislation on the part of the Hong Kong Government.

Deposit-Taking Companies

Before 1970, the banking sector was completely dominated by

commercial banks. Indeed it might be said that there was only one

type of bank then: commercial. In early 1970, merchant banks and

finance companies began to appear on the scene. These were mostly

wholly-owned subsidiaries of the giant international banks which

were barred from entering the Hong Kong banking market by the mora-

torim on banking licences. These finance companies, with impeccable

credentials and relative freedom in interest rate policies, provid-

ed the depositors with an attractive alternative for placing time

deposits.

In 1976, the Deposit-Taking Companies ordinance was passed.

Under this ordinance and its subsequent amendments, all depository

institutions, other than the licensed banks, are required to re-

gister with the Commissioner of Banking. They must have a minimum

issued capital of HK$20 million and a paid-up capital of HK$10

million. They may not use the word "bank" in their titles, and

3most important, are allowed only to take time deposits of not

less than HK$50,000 from each depositor. All these provisions are

aimed at the protection of the small depositors.

Since HK$50,000 is no longer considered a large amount,

legislation is being drafted to classify the finance companies into

(1) Licensed Deposit-taking Companies and (2) Registered Deposit-

taking Companies. Each would have different capital requirements

and the former would be allowed only to take time deposits of not

less than HK$500,000 from each depositor.

In Hong Kong, interest on all deposits other than savings

accounts is subject to a 15 percent withholding tax'. However,

interest earned on deposits overseas is not taxed. From the view-

point of tax avoidance, Euro-currency and Asian-currency deposits

are more attractive. Nevertheless, all foreign currency deposits

involve exchange risks. To satisfy the depositors' demand, the

finance companies offer an alternative-- the offshore swap deposit.

This converts the depositors' Hong Kong dollars into a foreign

currency and deposits it with the finance company's overseas offices

in Guam, Bermuda or Singapore. At the same time, a forward exchange

contract is effected to convert at maturity the proceeds (principal

plus interest) into Hong Kong dollars. By this mechanism, the

depositors can know before commitment exactly what the return on

their deposits will be.

While the present Deposit-taking Companies ordinance requires

a minimum of HK$50,000 to be deposited by each depositor, individual

finance companies may require a minimum of one million Hong Kong

1In his Budget Speech on 24 February, 1982, the Financial

Secretary proposed that the interest tax be reduced to 10 percentand not be chargeable on foreign currency deposits effective 25

February, 1982.

4dollars to qualify for offshore swap deposits. For this reason,

the channel to offshore swap deposits is not readily available to

small depositors.

Traditional Private Chit-Funds

The traditional private chit-funds originated several（ 義 會 ）

hundred years ago in South China among the lower income groups,

such as hawkers and peasants. They are still popular today among

the hawkers, porters, and housewives.

The chit-fund is a group of people who voluntarily get to-

gether and agree to contribute a certain sum of money each month

for a certain number of months (usually equal to the membership

size). The total amount to be contributed by each member is the

target saving. Each month, one member of the group can "withdraw"

the tarqet savinq by offering interest to(in effect, advance標 會 ）

all other members. The interest to be accepted depends largely on

competition, that is, the number of persons who want to "withdraw"

the target saving at the same time. To the needy members, the

chit-fund is in effect a means of borrowing. And, this mechanism

generates considerable interest income to the less needy members

who withdraw the target saving at or close to maturity.

In the 1950s, when the number of licensed banks remained in

the range of 80-90, the private chit-funds were more popular than

the banks among the lower income sector. For this reason, chit-

fund companies began to form and operate on a commercial basis to

tap the demand. In the early 1960s, instances of malpractice by

the operators of the chit-fund companies were frequently reported,

which inevitably reduced the confidence of the depositors. On the

other hand, after the bank crisis in 1965, licensed banks strengthen-

ed their management and greatly expanded by opening branches almost

5everywhere throughout Hong Kong. As a result, the chit-funds began

to lose their members to the banks.

The final blow to the chit-funds came in 1972 when the Hong

Kong Government banned all chit-fund companies with the exception

of the genuine traditional private chit-funds. Also, very restric-

tive regulations were imposed on the operation of the private chit-

funds that were allowed to continue their operations.

Credit Unions

Credit unions, which were introduced to Hong Kong in 1964,

provide another alternative for deposits. Credit unions are mini-

banks for their members. They deposit their money with a view to

earning interest and also can borrow money when in need.

The legal status of the credit unions was formally recognized

by the enactment of the Credit Unions Ordinance in 1970. Since

then their growth has been rapid. At the end of 1981 there were

52 credit unions with a total membership of 14,000 and total

deposits of 107 million. However, this amount of deposits, when

compared with the commercial banks, is negligible.

Gold

Gold was legal tender in China until the fall of the Ching

Dynasty in 1911. Then came the silver dollar which was backed up

by gold. In 1928, the Chinese Government (Nationalists) abandoned

gold for its currency backing. Even so, in the eyes of the elderly

Chinese, gold is still the "real money" or an asset that will never

fail. This mentality is common among the Chinese. This is because

before 1949, the Chinese currencies failed one after another, only

the value of gold stood firm.

The Chinese are not the only people who prefer gold to money.

6Following the fall of South Vietnam in 1975, thousands of Viet-

namese refugees fled to Hong Kong in fishing junks. It was reported

that each refugee paid eight taels of gold as the price to board

a junk1. These illustrates that among the Asians, the value of

gold is eternal.

In the nine year period from 1972 to 1980, the price of gold

in Hong Kong rose from HK$310 a tael to HK$4,800 a tael. This 16

fold appreciation certainly reinforced the belief that gold would

never fail and inevitably stimulated speculation. However, the

price of gold began to fluctuate widely after the peak was reached in

January, 1980. It fell to HK$2,700 a tael in July, 1981 and went

up again to HK$3,300 a tael in September, 1981. At the time when

this paper is written (March, 1982), the price of gold in Hong

Kong is in the range of HK$2,100- HK$2,200 a tael.

Before 1975, there was predominantly one type of gold- the

99 gold bars (i.e. 99 percent pure gold in the denomination of 5-

tael bars and 10-tael bars) traded through the Chinese Gold and

Silver Exchange Society. Smaller denominations were available in

the retail market. Very often, the jewellery shops were and are

also retail gold dealers. Until recently, small investors bought

mainly from jewellery shops.

Gold Coins

In 1975, the Hong Kong Government issued its first gold coins

to commemorate the Royal Visit (Queen Elizabeth the Second) to Hong

Kong. It was heavily oversubscribed. This success encouraged the

government to implement a plan to issue 12 series of gold coins to

1Between 1977 and 1981, it was repeatedly reported in the

newspapers, and news broadcast through the radio and television.

7mark the traditional Chinese 12-year cycle. The first of the series

was for the year of the Dragon in 1976. Then came the years of

"the" Snake" in 1977, "the Horse in" 1978, "the Sheep" in 1979,

"the Monkey" in 1980, "the Cock in" 1981 and "the Dog" in 1982.

While all these memorial gold coins are in the denomination of

HK$1,000, their original list prices differ in line with the gold

price at the time of issue. They have, however, one thing in

common: the market values were soon higher than their list prices.

There is a saying that the Hong Kong Government gives a fortune to

those who apply for and are allotted a gold coin.

In 1979, the Chinese Government issued a set of gold coins to

commemorate the 30th birthday of the People's Republic. The set

consisted of four gold coins in the denomination of RMB Yen 400

each. The list price was HK$7,600 a set. At first, the issue was

oversubscribed and the marketprice soon rose to HK$8,600. It was

later discovered that the allotments to the U.S.A. and Canada were

unable to enter the markets and had to find their way back to Hong

Kong. This turned the allottees in Hong Kong to a losing position.

In addition to the memorial gold coins, the Krugerrand of

South Africa and the gold medal of Credit Swiss have developed a

sizeable market in.Hong Kong. Neither the Krugerrand nor the Credit

Swiss gold medal is a memorial. They are issued constantly. While

the Krugerrands are denominated in 1/10 oz, 1/4 oz, half-oz and

one-oz, the Credit Swiss gold medals are available in 1-gm, 2.5-gm,

5-gm, 10-gm and 20-gm denominations. The Credit Swiss gold medals

are claimed to be superior to any gold bars and gold coins in that

they are composed of 99.99 percent pure gold.

In recent years, gold dealing in Hong Kong developed greatly.

While margin dealing at the wholesale level is common, the tra-

Bond trading in Hong Kong is literally dormant . Before 1975

Credit Swiss gold medals are actively traded at commercialbanks ,

jewellery shops , foreign exchange dealers and even in department

stores.

Bonds and Stocks

Bond trading in Hong Kong is literally dormant . Before 1975

only three bonds 1 were traded in the extremely sporadic and inactive

market . Various factors account for this situation . Firstly , the

Hong Kong Government traditionally pursues a conservative fiscal

policy , and its chronic fiscal surplus ' makes regular bond issues

unnecessary. Secondly , business firms , particularly the Chinese

firms , are generally not keen to issue debt instrumentsbecause in

a low tax environment, the use of leverage is not too attractive2

Finally , the average Hong Kong investor is also said to prefer

equities to fixed - interest securities as a hedge against inflation .

In the ten year period studied , there had been some develop -

ments in the bond market . In 1975 , the Hong Kong Government' s five

year HK $ 250 million 6 = 2 percentbond issue , floated to finance a

recession year deficit , was heavily oversubscribed. Also some large

corporations, such as Jardine Mathesonand Hong Kong Land , have in

recent years issued bonds and convertible debentures denominated in

both Hong Kong and U . S . d llars . Anotherhighly successfulissue

was the ten - year HK $ 400 million 93 percent bond floated by the Mass

1 The three bondswere ( 1 ) the 1934 Loan , ( 2 ) the 1940 Loan

and ( 3 ) the 1948 RehabilitationLoan .

2 In Hong Kong , while interests on bonds and debenturesare

allowable expenses for profits tax purpose , the rate of profitstax is merely 16 . 5 percent for corporations,

9Transit Railway Corporation in 1976. However, the subscribers to

all these bond issues are mainly institutions. To individual in-

vestors, a bond is still not a popular investment.

In Hong Kong, investment in stocks is the preferred form of

security investment. There are two ways for an investor to acquire

stocks. One is by subscription to the new issues. The other, the

more common way, is by buying through the stock market.

Stock trading in Hong Kong commenced in 1866, following the

passing of the Companies Ordinance No. 1 in 1865. Before World War

Two there were two rival stock exchanges, but in March 1947, these

were merged together and formed the Hong Kong Stock Exchange Limited.

This then became the only stock exchange in Hong Kong until the end

of 1969 when the Far East Stock Exchange commenced business. After

that came the Kam Ngan Stock Exchange in 1971 and the Kowloon Stock

Exchange in 1972. At this point, the government stepped in and

banned any further opening of stock exchanges. These four stock

exchanges operate with their own rules and regulations. Hence,

standards relating to listing requirements, trading practices and

financial resources of stock-brokers vary considerably from one

exchange to anotherl. As a result of the government's effort to

standardize stock trading practices, the Stock Exchange Unification

Ordinance 1981 was passed in February, 1981. This ordinance em-

powered the Financial Secretary to fix a date within three years

for the existing four stock exchanges to be liquidated and a unified

stock exchange to be formed. The new stock exchange so formed has

taken the name "Stock Exchange of Hong Kong Limited" and will

Interested readers are reterred to Y.C. Jao's "Banking and

Currency in Hong Kong" (1974) and Chapter 6 "Financial Structure"

of Y.C. Jao and E.K.Y. Chen's Hong Kong Economic Affairs" (1980).

10commence business upon completion of the construction of its

tracing hall .

AppendixI ( c ) sets out the annual values as well as the

growth rate of stock turnover in Hong Kong since 1951 . The year

1968 can be taken as a ber - chmarkyear . Prior to 1968 , the stock

market was rather parochial and riot noted for any broad and active

transactions . Because of its extreme sensitivity to political

events , the market was liable to precipitous declines during

emergencies. This occurredin 1949 and in 1967 . In fact , in 1967

the stock market was compelled to suspend trading for three weeks

during the height of the disturbances. Throughoutthe post war

period up to 1968 , institutionsaccountedfor the majority of the

trading and except for the bull market of 1959 - 61 , small investors

had not participatedto any significant extent .

Stock turnover in 1968 was triple that of the depressed1967 .

Moreover, it continuedto expand by leaps and bounds so that the

total turnoverin 1972 was more than forty - six times that in 1968 .

Stock prices , as measuredby the Hang Seng Index , rose from 107 . 55

at the end of 1968 to 843 . 30 at the end of 1972 . Meanwhile, the

number of stock exchangesproliferatedfrom one to four new list -

ings and rights issues began to appear at increasingspeed .

Practically every new issue was tremendously oversubscribed. Most

importantly , the whole community ( from business executives to

domestic servants ) appeared to be seized by stock market mania .

While the total value of stock turnover has risen from

HK $ 140 . 7 millionin 1951 to HK $ 105 , 986 . 85 millionin 1981 , the

number of actively traded stocks remains about thirty . Moreover ,

investors in Hong Kong , institutionsand individualsalike , tend

to concentrateon the blue chips .

11Nominally full payment is required for the purchase of stocks

However, many brokers grant margin facilities to favoured clients

by hypothecating the securities to their own bankers. There are

no formal regulations regarding margin payment, but as a rule banks

are prepared to grant advances to hypothecated stocks up to 50

percent of their market value. And this ceiling may occasionally

be exceeded by the more aggressive banks. This greatly facilitates

speculation in the stock market.

The thinness of the Hong Kong stock market is vulnerable to

manipulation by big operators and destablization by speculation.

The following section attempts to briefly outline the stock market

situation between 1972 and 1981.

The Stock Market. 1972-1981

While, on the whole, the rise in stock prices from 1968 to

1971 could be justified by favourable fundamental factors, its

continuance from 1972 onwards was far out of line with economic

reality. The Hang Seng Index of stock prices stood at 341.36 at

the end of 1971 and took a quantum jump in 1972 to close the year

at 843.40. In the first ten weeks of 1973, stock prices continued

to rise at a frantic pace,and on 9 March, the Hang Seng Index

reached the record high of 1,774.96. At that level, the weighted

average price/earnings ratio was 85 and for some blue chips the

ratio exceeded 200. Such level of stock prices could only be the

result of wild speculation. With profit taking by foreign investors,

soaring interest rates due to world-wide inflationary pressures

and expectations, tightening of credit by the licensed banks,

stock prices began their hasty retreat soon after the peak was

reached. The oil crisis at the end of 1973 and the onset of the

worlo - wide recessionire 1974 acceleratedthe decline , of stock :

prices . By 12 December, 1974 , the Jiang Seng Index had fallen to

only 150 . 11 . In 1975 , despite the prevailingrecession, stock .

prices steadily rallied from around 170 at the start of the year

to 350 at the year end . Throughout1976 and 1977 , the Hang Seng

Index moved in a relativelynarrow range between 350 and 465 1 .

then came the long economicrecovery in 1978 , followed by the pro -

perty boom until 19812 . The Hang Seng Index rose from 393 . 74 at

the start of 1978 to 1 , 810 . 20 on 17 July , 1981 , which exceededthe

peak at 1973 .

While the purpose of this study does not include an explora -

tion of the factors pushing up stock prices in 1972 and in 1981 ,

it would be interestingto see what return an investor would gain

at year end 1981 if he began investingin stocks at - the start of

1972.

Other Investment Alternatives

Other categories of investmentsin Hong Kong include real

estate , precious stones as well as articles of aesthetic values

such as antiques , paintingsand even stamps .

Real Estate

In Hong Kong the attitude of investors towards real estate as

an investmenthas changed over time . Before 1977 , the traditional

view of buying a flat for rental income prevailed . Speculationby

buying and resale at a profit was relatively insignificant. Since

1977 , when the property market began to boom , speculationhas been

1 E . K . Y . Chenand Y . C . Jao ' s HongKongEconomicAffairs( 1980 )

2 K . A . Wong ' s Rising PropertyValues SupportAnotherBoom

in AsianFinance. ( October15 , 1980 ) , pp . 73 - 75 .

11playing a very, if not the most, important role. Transfers of

Sales and Purchase Agreements for all kind of units: residential

flats, offices, commercial complexes and industrial units dominated

the scene during these four years.

In fact, the term real estate when used loosely refers to

very different markets which are so heterogeneous that to say in-

vestment in real estate can be misleading. Moreover, even before

1977, the cost of a residential flat was quite beyond the means of

small investors. Also, the time span of the investment must be

considerably long. For this reason, except for the speculation

which prevailed in the 1977-80 period, real estate is not a popular

investment to small investors. While this study makes no attempt

to even touch on the subject, the complex nature and the importance

of real estate in the Hong Kong economy justify separate researches

on the subject.

Precious Stones and others

Quite a number of people acquire precious stones. The most

common are diamonds, jade and rubies. While the value of a diamond

can be determined by its four Cs: carat, clarity, colour and cutting,

it is largely dependent on the judgement of the professional valuer.

The value of jade is even more difficult to determine. Despite

the fact that there are quite a number of jade valuers in Hong

Kong, the situation is still like the saying beauty is in the eye

of the beholder. For this reason, it seems justified to say that

precious stones are mainly kept for motives other than investment.

These motives may be aesthetic, for novelty and prestige.

Similarly, antiques, paintings and stamps are primarily kept

out of personal liking rather than as investments. Furthermore

access to the markets for jade, antiques, paintings and stamps is

14indirect. Very often, the assistance of a professional valuer is

required in each transaction. The professional valuer, for a fee,

brings together the buyer and the seller and plays the most import-

ant part in reaching a mutually agreeable price.

Scope and Limitation of Study

Of the investments reviewed earlier, only savings deposits,

gold and stocks are selected for detailed study. This is partly

because of the availability of published data and mainly because

these investment alternatives have some characteristics in common.

Firstly, the amount involved can be very small and is thus within

the means of an average investor. Secondly all these investments

are equally liquid since their respective markets are readily ac-

cessible to investors. Finally, the relevant information which

is needed for the investors to make a decision is readily available.

With the information in hand an investor can handle these invest-

ments on his own.

The writers are aware that these investments are of different

risk levels. This study, however, is confined to an exploration of

the relationship of the return on these investments. No attempt

is made in this study to deal with the risk element.

Return on Savings Deposits, Gold and Stocks

While possessing some common characteristics, savings deposits,

gold and stocks generate return to the investors in different forms.

The return on savings deposits is in the form of interest which,

though varying from time to time as the interest rate changes, is

positive. The return on gold is in the form of changes in asset

value over time which can be positive in times of price appreciation,

and negative in times of falling prices. The return on stocks is

15basically a combination of cash dividends, bonus shares and changes

in asset value due to price changes which, like gold, can be either

positive or negative.

The External Examiner's Comments

One of the most important comments is that the return on

savings deposits is not always positive when inflation is taken into

consideration (page 14). It is recommended that the total return

concept should be used in future studies.

Another comment is that the writers should have made explicit

their assumption (on page 21) that the return on stocks used in this

study represents the return on a portfolio of stocks which are

- ntinal t the Hana Sena Index constituent stocks.

16

CHAPTER TWO

METHODOLOGY

Basic Data

Return on Savinqs Deposits

Published savings deposits interest rates from 1972 to 1981

are used for the computation of return on savings deposits.

Return on Gold

Daily closing gold prices between l3/2 and 1961 supplied by

the Chinese Gold and Silver Exchange Society are used for the com-

putation of the return on gold.

Return on Stocks

Daily closing Hang Seng Index of share prices and dividend

yields supplied by the Hang Seng Bank Research Department are used

for the computation of the return on stocks.

Hang Seng Index

The Hang Seng Index, prepared by the Hang Seng Bank Research

Department, uses the closing prices of 31 July 1964 as the base.

Its method of computation follows closely that of the American Dow

Jones. The method of computation of the Hang Seng Index is given

in Appendix II(a).

The Hang Seng Index does not measure price changes in all

listed stocks. This is because not all stocks are of identical

interest and importance to the market. To represent the Hong Kong

17stock market, the Hang Seng Index uses a selection of 33 stocks

which cover over 70 percent of the total market value. According

to Hang Seng Bank Research-Department, the selection criteria are:

The stock must be of long term and major concern to

investors.

The stock must be issued by a corporation which is

a dominant force in its own sector of the economy.

Its prospects must be solid, its record substantial,

and its primary base of operation is Hong Kong.

The turnover of the stock must be sufficiently large

to demonstrate public response.

The stock must be a salient market element and its

volume must be adequate to cope with demand in a

brisk market.

The market situation changes with time. Yesterday's leaders

fall behind, new sectors of the economy move into orbit one cor-

poration is absorbed by another. These events are accommodated by

the Hang Seng Index to maintain its representativeness. Since it

first appeared in 1969, the Hang Seng Index has kept on-updating

its list of constituent stocks. The original list and the latest

list of its constituent stocks are set out in Appendix II(b).

The Hang Seng Index is not compiled by simply adding up

the prices of the 33 constituent stocks. Rather, weights are

applied to the constituent stocks according to their relative signi-

ficance as measured by the quantity issued in 1964. These weights

thus reflect the relative importance of each stock as compared to

the other stocks in the index at base date. Whenever there is a

replacement of a constituent stock, adjustment is made through the

chaining technique which traces back what the current situation

18would have been if tie new stock had been included from the very

start or an old stock deleted riqht at the beginninq.

The Hang Seng Index is adjusted whenever there is capital

adjustment to any of its constituent stocks. While only simple

arithmetic is involved in adjusting the Hang Seng Index for share

splits and bonus issues, the Index is adjusted for a rights issue

by including the rights issue as if it were a new share within the

Index.

Because the Hang Seng Index has better coverage, it is much

more widely followed by the investing public and therefore super-

sedes the older, but little-known index compiled by the Far Eastern

Economic Review, based on closing prices on 3 August 1962.

After the publication of the Hang Seng Index in April 1969,

the Far East Stock Exchange produced its Index which was composed

of 56 constituent stocks in 1972. Also in 1973, the Kam Ngan Stock

Exchange started its Kam Nqan Index of stock prices.

In selecting one among the three indices to be used as basic

data to measure the return on stocks, the Hang Seng Index is selec-

ted in view of its being the longest in time series, the availability

of its method of computation, and its international recognition.

Input and Analyses Used

In this study, two different sets of input computed from the

same Basic Data are used for two different series of analyses.

First Series of Analyses: Buv and Hold

In general, to place money in a savings deposits account is

one of the most passive ways of investing. While individual inves-

tors may increase their return on gold and on stocks by actively

and wisely buying and selling, there are quite a number of investors

19who simply buy and hold their investment, whether it is gold or

stocks.

It is to these less active investors that the first series of

analyses of this study refers. The analyses are to explore the re-

lationships, if any, among the rates of return on savings deposits,

gold and stocks with the latter investments under the investors'

Buy and Hold behaviour.

Second Series of Analyses: Systematic Speculation

It is a matter of fact that many, if not most, investors

actively buy and sell in the bullion and the stock markets. It

would be interesting to explore the relationship, if any, between

the return on gold and on stocks under the situation where the

investors actively buy and sell most of the time. For this reason

thA cPrnn1 cPrPS of analyses of this study are required.

The second series of analyses differ from the first in three

ways: Firstly, investment in savings deposits which, by its static

nature, makes its return in no way comparable to those of the dyna-

mic buying and selling of gold and stocks, is excluded from the

analyses. Secondly, Systematic Speculation is used to represent

the investors' active involvement in the bullion and the stock

markets. This systematic speculation provides a common basis for

the investors to buy and sell their investments, and hence makes

the comparison of the return on gold and on stocks meaningful.

Finally, under systematic speculation, only the changes in asset

values are considered, with the dividend yield on stocks being

excluded from the analyses.

Systematic Speculation

Systematic speculation refers to an investor who consistently

24follows a principle in buying and selling. Specifically, he buys

whenever the price of his investment, be it gold or stocks, rises

to a certain percentage above the period low and sells whenever the

price drops a certain percentage off the period high. The rationale

behind this approach is simple: buy low and sell high. An investor

can seldom buy at the lowest and sell at the highest because he does

not know how low is the lowest and how high is the highest. It is

only when the price has begun to fall today that the investor knows

the price the day before was the highest. The best the investor can

do is to sell his investment today, at a price slightly below the

maximum.

How much off the maximum to sell and how much above the mini-

mum to buy is at the discretion of the individual investor. It is

believed that anything less than three percent will result in too

many transaction signals. The profit from many of such transactions

may not even cover the transaction cost, thus turning the speculation

exercise into a net loss. On the other hand, by using too large a

percentage, say above ten percent, the investor may miss many profit-

able opportunities because the transaction signal will appear only

when there is a very substantial price change. To illustrate this

mechanism, a flowchart which sets out the computer programming logic

for systematic speculation is given in Appendix V(a).

Input under Buy and Hold

In the first series of analyses, the return on the three

investments are all expressed as a percentage of the amount invested.

Owing to the absence of dividend yield information for the Hang Seng

Index constituent stocks prior to May 1973, the period analysed is

from June 1973 to December 1981, totalling 103 months.

21Return on Saving Deposits

Published savings deposits rates are used to calculate the

return for a month, which is expressed as a percentage of the amount

deposited. Principals are adjusted every six months following the

crediting of interest.

Return on Gold

where Gi average gold price for the month i

average gold price for the month following

Return on Stocks

where Hi average Hang Seng Index for the month i

average Hang Seng Index for the month following

Di average dividend yield for the month i expressed

as a per annum percentage of Hi

Analyses used under Buy and Hold

Both simple and multiple regression analyses are used to

explore the relationships of the returns.

Simple Regression Analyses

(1) Correlate Z (dependent variable)

with X (independent variable)

(2) Correlate Z with X t-l

(3) Correlate Z with X t-2

These regression analyses are to explore the relationships,

if any, between savings deposits interest rates and the return on

22stocks in situations with no time lag, with one month's and two

months' lag, respectively.

(4) Correlate Z with Y

This regression analysis is to explore whether the gold

prices and the return on stocks move together or in opposite

directions.

(5) Correlate Y with X

(6) Correlate Y with X t-1

(7) Correlate Y with X t-2

These regression analyses are to explore the relationships,

if any, between savings deposits interest rates and the gold prices

in situations with no time lag, with one month's and two months'

lag, respectively.

Multiple Regression Analyses

(8) Correlate Z with X and Y

(9) Correlate Z with X t-l and Y

(10) Correlate Z with X t-2 and Y

These multiple regression analyses are to explore the re-

lationships, if any, between the return on stocks on the one hand,

and savings deposits interest rates and gold prices on the

other.

Input Under Systematic Speculation

In the second series of analyses, the investments analysed

are confined to gold and stocks for reasons mentioned earlier. The

final input for analyses is the return on investment for the month

in Hong Kong dollars.

Return on gold for the first month

Original Investment Value

23

GiReturn on gold for all other months

Month-end Value of investment in gold for the month iwhere MEV1

Original investment value, by design is HK$10,000 on January

2nd, 1972.

Return on Stocks tor the tirst month

Original Investment Value

Return on stocks for all other months

Month-end Value of investment in stocks for the month iwhere

Original investment value, by design is HK$10,000 on January

2n8. 1972-

Daily closing gold prices and the daily closing Hang Seng

Index from 1972 to 1981 (Basic Data) are fed into the computer which

is loaded with programmes for systematic speculation to generate sets

of 120 month-end values of the original investments.

Since there is no way to know in advance what the most

appropriate rate for a transaction signal is, and to explore whether

the analyses results are consistent over different rates, four rates:

3, 5, 7 and 10 percent are selected to generate four sets of month-

end values of gold investment. When doing the computer run for spe-

culating in stocks, the same four rates are used to generate the

month-end values of the investment in stocks.

Analyses Used Under Systematic Speculation

Simple regression analyses are applied to correlate the four

sets of return of the stocks with those of the gold investment. These

analyses are to explore whether and in what direction and to what ex-

tent the return of the stocks and those of the gold investment are

related.

24

CHAPTER THREE

FINDINGS

Findinqs under Buy and Hold

By using simple and multiple regression techniques, the

relationship of the returns on savings deposits, gold and stocks

were explored where

Return on Saving DepositsX

Return on Gold andY

Return on StocksZ

The findings are listed below. For details refer to Appendix

IV (b)

Simple Regression Analyses

(1) The correlation coefficient of Z with X is 0.009481

(2) The correlation coefficient of Z with X t-l is 0.048705

(3) The correlation coefficient of Z with X t-2 is 0.056894

The above results show that there is little to no relation-

ship between stock yield and savings yield at situations with no

time lag, one month's and two months' time lag on savings yield,

though the correlation improves with time lags.

(4) The correlation coefficient of Z with Y is -0.154494

This shows that there is both a negative and weak relationship

between stock yield and gold yield.

(5) The correlation coefficient of Y with X is 0.008372

(6) The correlation coefficient of Y with X t-l is 0.015878

(7) The correlation coefficient of Y with X t-2 is 0.034410

25The above shows that there is little to no relationship

between gold yield and savings yield at situations with no time

lag, one month's and two months' time lag on savings yield. The

correlation coefficient improves when time lags are applied.

Multiple Regression Analyses

(8) The multiple correlation coefficient of Z with X and Y

is 0.290522

(9) The multiple correlation coefficient of Z with X t-l and

Y is 0.319752

(10) The multiple correlation coefficient of Z with X t-2 and

Y is 0.334707

The above shows that there is a weak relationship between the

return on stocks versus return on saving deposits and return on

gold prices, with the relationship improving on the application

of time lags of one month and two months on savings deposits.

Average Return per Perioa for 103 Periods

The average returns, per period, for the 103 periods iwnere

one period= one month) under study on savings deposits, gold and

stocks are found to be:

StocksGoldSavings

1.46%1.78%0.42%

This shows that in this period gold has the highest average

return, followed by stocks and then by savings.

Findings under Systematic Speculation

Simple regression analyses were used to correlate the four

sets of month-end values at the cut-off rates of 3, 5, 7 and 10

percent of the stocks and those of the gold investment where

26

The correlation coefficients (r) of Gi with Si are:

0.023 at 3%r

0.169 at 5%r

0.165 at 7%r

0.113 at 10%r

This shows that there is a weak relationship between the

month-end values (net of the original investment of $10,000) of

gold prices and stocks, at the four different transaction signals

or cut-off rates of 3, 5, 7 and 10 percent.

Other Findinqs

While exploring the various relationships under the Buy and

Hold and Systematic Speculation strategies, a number of other

comparisons and contrasts were made and those found to be inter-

esting are listed below:

(1) Comparing the month-end values of gold with the value of

the original investment both under the Buy and Hold and

Systematic Speculation behaviours, it is found that the

Buy and Hold behaviour achieved overwhelmingly better

results during the period of study whereas Systematic

Speculation in general resulted in losses with the

exception of the cut-off rate at 10%. Looking into the

basic data, gold prices were on an upward trend most of

the time during the 120 periods. It therefore paid to

adopt the Buy and Hold strategy.

The comparisons are listed in Appendix V (b).

(2) Comparisons were also made of the month-end values of

Gold under Buy and Hold versus those under Systematic

27Speculation, using the former as bases. (See Appendix

V (b)). It is found that the Buy and Hold behaviour

excels in this period of consistently rising gold prices,

(3) Next came comparisons of the month-end values of stocks

with the value of the original investment under both

kinds of behaviours. The findings show that both the

Buy and Hold and Systematic Speculation strategies give

rise to gains most of the time, but the latter produces

much better results. See Appendix V (c).

(4) Comparisons were then made of the month-end values of

stocks of one strategy against the other, again using

those under Buy and Hold as bases. Details are shown

in Appendix V (c). The findings indicate that Systematic

Speculation is superior to Buy and Hold behaviour in a

period of volatile stock prices.

(5) Taking the average of the month-end values of these 120

months on Gold and using the Buy and Hold average as a

base (100%), it is found that Systematic Speculation is

inferior to the Buy and Hold strategy in a period of

upward gold price trends. See Appendix V (d).

(6) Repeating the exercise as in the last paragraph but this

time studying stocks, it is found that Systematic

Speculation is far superior to Buy and Hold when dealing

in a volatile stock market. See Appendix V (e).

28

CHAPTER FOUR

ANALYSES AND INTERPRETATION

Under Buy and Hold

Simple Regression Analyses (1), (2) and (3)

The correlation results of a weak relationship between stock

yield and savings yield are due to the following reasons. Firstly,

it is because a relatively stable component (savings) is being

correlated with a volatile component (stocks). Savings have relatively

no risk as interest rates are stable and are always positive while

stocks are risky and their asset values are volatile. Secondly, the

correlation study is restrictive in the sense that there is no way to

capture the real Buy and Hold behavior in a regression and correlation

analysis because the investors have different time horizons. In this

study, however, there is a tacit assumption that the investors all

have a one month Buy and Hold time horizon.

The correlation results improve with time lags of one month and

two months because savings yield in Hong Kong is more or less regarded

as a yield standard for investments, like the U.S. risk-free bond

rate and as response to interest rate changes are not instantaneous

and spontaneous, it takes some time for the investor to react to the

new situation. On the other hand, the relationship is still very

weak when time lags are taken into consideration due to the reasons

given in the above paragraph.

Simple Regression Analysis (4)

The correlation result of a negative and weak relationship

24between stock yield and gold yield is because basically stocks and

gold are both competing for the investor's dollar. When the gold

yield is high, investors will tend to put their stake in gold out of

their limited investment budget, and vice versa.

Simple Regression Analyses (5), (6) and (7)

The correlation results of a weak relationship between gold yield

and savings yield are due to similar reasons as set out in paragraph

one of this chapter on the stock and savings yield relationship.

However the relationship between gold and savings yield is even

weaker than that between stock and savings because the stock yield

includes a positive though small element of dividend yield, rendering

it less volatile than gold yield. The correlation results improve

with time lags for the same reason given in the second paragraph of

this chapter.

Multiple Regression Analyses (8), (9) and (1U)

The correlation results of multiple regression analyses improve

considerably over those of simple regression as consideration is now

given to two factors jointly, namely savings and gold yield, instead

of only one.

The relationship is still weak because firstly yield is not the

only consideration in the investor's mind. There are many other

considerations such as liquidity, risk, opportunities and availa-

bility, just to mention a few. Secondly, apart from savings

deposits, gold and stocks, there are many other forms of investment,

as mentioned earlier in Chapter One. Notwithstanding, many of them

are not popular with the average small investor, since they involve

commitment on the part of the investor. For example, a diamond

collection, though it is not readily traded, uses up part of the

investor's investment budget. As another example, buying one's own

30home involves a long-term commitment Hereby reuuciny true

flexibility of the investor to invest in stocks, gold and savings.

The reason why the relationship improves slightly with the

introduction of time lags of respectively one and two months is

because firstly the investor's response is not so fast as to

warrant an immediate reaction and secondly, the investor may wait

a while to be sure of market trends before making any decisions.

The investor may also need to sell his present holdings of gold to

go into stocks, and vice versa.

To justify our methodology under Buy and Hold, F-tests are

performed to test the significance of the regression. (See

Appendix IV (c). The analysis of variance provides an appraisal

of the overall significance of the regression as opposed to the

significance of each of the regression coefficients. It gives a

test of the null hypothesis of no relationship between the

dependent variable and all of the independent variables considered

collectively. Another way of wording the hypothesis is

H o: the regression is not significant

H 1: the regression is significant

The null hypothesis is accepted or rejected on the basis of the

usual F-test.

Comparing the computed F values listed in Appendix iv (b)

with the F values from table in Appendix IV (c) the results of

the F-tests are:

Simple Regression Analyses

not significant(1), (2), and (3

significant at 0.05 and 0.01(4)

not sicmificant(5), (6) and (7)

Multiple Regression Anayses

(8), (9)and (10) -significant at = 0.05 only

where = the level of significance

Simple regressions (1), (2) and (3) are found to be not

significant chiefly for the reason that a relatively stable

component (savings) is being correlated with a volatile component

(stocks).

Simple regression (4) is significant at both the 5 percent

and 1 percent levels as one volatile component (stocks) is

correlated with another (gold).

Simple regressions (5), (6) and (7) are insignificant for the

reason that, once again, a stable component (savings) is correlated

with a volatile component (gold).

Multiple regressions (8), (9) and (10) are significant at the

5 percent level as two independent variables (savings yield and gold

yield) instead of only one are correlated with stocks yield. They

are however not significant at the 1 percent level because yield is

not the only thing an investor considers. There are many other

factors which may influence an investor's behaviour.

Under Systematic Speculation

The weak relationship between the month-end values of gold

prices and stocks as reflected by the correlation results of the

simple regression analyses under Systematic Speculation can be

attributed to the following reasons. Firstly, speculation in gold

is not as popular in Hong Kong as speculation in stocks. People

do not really view the two as alternative investments. Secondly

speculators do not speculate only at the month-end. Perhaps daily

data may be more relevant.

32

CHAPTER FIVE

SUMMARY AND CONCLUSIONS

In Hong Kong there are numerous investment opportunities.

The most common ones are deposits, gold,bonds and stocks, real

estate and precious stones.

Deposits can be made with commercial banks, deposit-taking

companies, traditional private chit-funds and credit unions, with

the most important channel being commercial banks.

Gold is the most important precious metal investment in Hong

Kong. An investor can purchase the traditional 99 gold bars,

memorial gold coins, the Krugerrands and the Credit Swiss gold

medals.

Bond trading is practically dormant as compared to investment

in stocks, which is very popular. There are four stock exchanges

in Hong Kong but they will be unified into one under the Stock

Exchange Unification Ordinance passed in 1981. The stock market

situation from 1972 to 1981 was briefly outlined to give an idea

how the Hong Kong stock market is vulnerable to manipulation by

big operations and destabilization by speculation.

Real estate refers to heterogeneous markets and involves sub-

stantial amounts of money. It is usually beyond the means of

small investors.

Precious stones, antiques, paintings, stamps etc. involve

personal liking and judgement.

16Delimitation

The writers therefore have chosen savings deposits, gold and

stocks to explore the relationship among their respective rates of

returns over a ten-year period from 1972 to 1981. These three

investment alternatives have some common characteristics, namely,

they are within the means of an average investor they are equally

liquid and they provide readily available relevant information for

decision making.

Methodology

The methodology of this empirical study is spelled out in

Chapter Two. The basic data are published savings deposits interest

rates, daily closing gold prices and daily closing Hang Seng Index

of share prices and dividend yields which are used to compute the

returns on savings deposits, gold and stocks, respectively.

The writers distinguish between the Buy and Hold behaviour

which applies to investors who are less active and Systematic

Speculation which refers to investors who actively buy and sell.

Two different sets of input computed from the same basic data are

used for the two series of analyses.

The Buy and Hold analyses try to explore the relationship

among the rates of return on savings deposits, gold and stocks.

The returns or yields are expressed as a percentage of the amount

invested. Owing to the absence of dividend yield information for

the Hang Seng Index constituent stocks prior to May 1973, the

period studied starts from June 1973 to December 1981, totalling

103 months or periods.

The Systematic Speculation analyses attempt to explore the

relationship between the return on gold and on stocks. Savings

deposits are excluded from the study due to their static nature

34and non-comparability. Dividend yield is also disregarded and the

writers concentrate on the changes in asset value. The final input

for analyses is the asset value of the original investment which

is stipulated at HK$10,000 on January 2nd 1972. The period studied

is from 1972 to 1981 with a total of 120 month-end values of the

original investment generated from daily closing gold prices and

daily closing Hang Seng Index. Four arbitrary transaction signals

or cut-off rates of 3, 5, 7 and 10 percent are used to generate

four sets of data for both gold and stocks to simulate the

behaviour of Systematic Speculation.

Both simple and multiple regression analyses are used under

Buy and Hold to explore the relationship of the returns while

simple regression analyses are applied to correlate the four sets

of month-end values of the stocks with the gold investment under

Systematic Speculation.

Findings

The findings of the regression analyses are set forth in

Chapter Three. Under the Buy and Hold behaviour, the relation-

ships between stock yield and savings yield, between stock yield

and gold yield and between gold yield and savings yield are very

weak. The multiple regression analyses also demonstrate a weak

relationship between stock yield versus savings yield and gold

yield, though the correlation coefficients improve considerably

over those of simple regression. Under Systematic Speculation the

relationship between the month-end values of gold prices and stocks

is also found to be weak. Some other findings are also reported.

For example, it is found that during the period of study, the Buy

and Hold strategy fared better in the light of consistently rising

gold prices while Systematic Speculation did better in a period

35

of volatile stock prices.

Analysis and Interpretation

An attempt was made to analyse and interpret the findings.

The weak relationships resulting from the simple regression

analyses under Buy and Hold are due to the restrictions imposed by

the tacit assumption of a one month buy and hold time horizon as

well as by the correlation of a relatively stable component

(savings) with a volatile component (stocks, or gold).

Multiple regression also gives rise to weak relationships

though the correlation results improve much over the simple

regression analyses. This is chiefly because yield is not the

only consideration of the investor.

In all the cases where time lags are applied the relationships

improve due to the fact that the investor's response is not instan-

taneous and it takes time to react to the new situation. F-tests

are performed to test the significance of the regressions.

As to the reason why there is a weak relationship between the

month-end values of gold prices and stocks, perhaps daily data

should be used instead of month-end values to reflect more.

realistically the systematic speculator's behaviour and perhaps the

investors do not regard gold and stocks as alternative forms of

investment.

Conclusions

To sum up, this empirical study shows that there is a lack of

relationship among the rates of return on savings deposits, gold

and stocks, both under the Buy and Hold and Systematic Speculation

strategies formulated by the writers.

Suggestion for Further Study

As the f indings of this paper pertain only to the period

covered and only to Hong Kong, it is suggested that interested

students can further study a longer time period or study a

different country, such as the United States, using the NYSE Index

to see whether the same kinds of relationships apply or whether

the results differ.

27

APPENDIX I (a)

Per Capita Savings DepositsSavings DepositsYear

HK DollarsHK$ Million

44.101011954

56.121331955

66.671661956

71.7019019 57

88.732441958

129.023691959

180.205371960

208.496631961

262.398791962

327.141,1451963

423.681,5211964

439.021,6201965

531.371,9821966

569.192,1801967

710.182,7911968

844.393,3671969

1,032.534,2221970

1,501.506,0741971

2,037.088,3061972

1,806.497,6101973

1,999.498,6371974

2,912.5512,8031975

3,620.2715,9401976

4,601.7620,7531977

5,264.8324,8501978

6,817.1233,2581979

8,315.8242,8091980

10,150.1852,8521981

Source: Hong Kong Annual Digest of Statistics

38

APPENDIX I (b)

A RECORD OF BANK RUNS IN HONG KONU

ParticularsYear/Month

6 out of 11 banks closed.1866

Oriental Bank failed1894

Liu Chong Hing Bank, Ltd. had trouble in1961 Jun

meeting'cash withdrawals and overcome

the situation with the joint support

of the HongKong and Shanghai Banking

Corporation and the Chartered Bank, Ltd.

Ming Tak Bank (unincorporated) was foundJan1965

insolvent and liquidated by Court Order.

Canton Trust and Commercial Bank was foundFeb1965

illiauid and liquidated by Court Order.

The following banks were all in severeJan/Apr1965

difficulty and survived only through

merger with giant international banks

and with government interventions

includinq.emergency order.

(1) Dao Heng. Bank Limited

(2) Far East Bank Limited

(3) Hang Seng Bank.Limited

(4) Kwong On Bank Limited

(5) Wing -Lung' Bank Limited

(6) Yau Yue Bank Limited

Source: J.C. YAO's Banking and Currency in Hong Kong.

39

APPENDIX I (c)

STOCK TURNOVER

As a PercentageValue

of the 1951 Value(Million Hong Kong Dollars)VPaY

100140.701951101142.301952107150.801953179252.001954237333.201955150211.001956105147.601957106149.701958256359.601959622875.801960

1,0051,414.201961499701.401962370520.701963531747.601964277389.501965249349.701966212297.701967671943.601968

1,8092,545.6719694,2565,988.641970

10,51414,793.39197131,10043,757.63197234,27048,217.381973

7,99311,245.6819747,34610,335.1819759,35013,155.9319764,3546,126.741977

19,48827,419.01197818,21825,632.74197968,00695,684.33198075,328105,986.851981

Source: Hang Seng Bank Research ueparrsnenz

40

APPENDIX II

HANG SENG INDEX

II (a) Computation Method of Hang Seng Index

II (b) Constituent Stocks of Hang Seng Index

41Ccputation Method of Hang Seng index

The Hang Seng Index of Stock Prices is computed on the market value approach. July 31, 19b4 isthe ease

date. The Index of thebsse is put at 100. We call this method the Weighted market capitalization method."

In statistical terms, it is a LAspeyre's index using base date number of shares outstanding in the stocks selected

as weights.

General Formula

The general formula for the computation of the HSI is:

the market price of stockion current day t.where

the market price of stockion base day o.

the number of shares outstanding of stockion base day o.

Numerical Illustration

Numerical illustrations are given below to show how the HSI worKS on the aoove Tormuid.

Base Date(a)Assume that three stocks were selected as Constituent Stock for inaex computation, and that: Stock A

with 10,000 issued shares, was sold at $10 per share: Stock B, with 5,000 issued shares, was sold at $15 per shareand Stock C with 8,000 issued shares. was sold at $20 per share.

($10 x 10,000) $15 x 5,000 ($20 x 8.000)Base Market Capitalization of

$335000Constituent Stocks$335,000

100 100Rase Index$335,000

(b) Date 1

Change in market prices: Prices of Stock A and Stock B increased to $12 and $16, while that of Stock C

decreased to $18.

($18 x 8,000($12 x 10,000 ($16 x 5,000)Current Market Capitalization of

$344,000Constituent Stocks$344,000

100 103Index 1$335,000

Date 2(c)Stock split and change in market prices: Price of Stock A changed to $7 after a "1 for 1" split, price or MOCK

R decreased to $15. price of Stock C increased to $19.

($7 x 20,000 ($15 x 5,0001 619 x 8,000Current Market Capitalization of

$367,000Constituent Stocks

1367.000110100Inex 2

$335,000

Date 3(d)New stock added to the constituents and change in market prices: 5tock.U, wan iu,uuu issuea snares, priueu

at $11 per share, was added to the constituents prices of Stocks A and B increased to $8 and $16, while price of

Stock C remained unchanged.

42

( i ) Index3 or new indexfor ( 119x 8 . 000)( $ 16x 5 , 000)( $ 8 x 20, 000) 100original Constituent Stocks$ 335, 000

( A , B & C )

$ 392. 000117100

$ 335, 000

$ 110 , 000 $ 110, 000( ii ) MarketCapitalizationof

StockD

( iii ) New Market Capitalization$ 392- 000 $ 110, 000= $ 502, 000of ConstituentStocks( A , B , C & D )

( iv ) Assumethat Stock D was alreadyselectedas one of the constituentstockson Base Date and its price

had moved strictlyin sympathywith all other stocks , then

Deflated New Market

$ 502, 000Capitalizationof100 $ 429, 060

Constituent Stocks 117( A . B . C & D )

adjusted base Market Lapitalizauonof

ConstituentStocks for

subsequentcomputation.

( e ) Date4

Chancein marketprices:Stock StockD $ 10 .$ 21StockB = $ 17StockA = $ 6

( $ 10x 10, 000)( $ 17x 5 , 000) ( $ 21x 8 . 000)( $ 6 x 20, 000) x 100Index4S 429, 060

$ 473, 000110100

$ 429, 060

Date5(f)Rights issue and market prices cnanges:CompanyB issuedrightsat the rate of " 1 " for " 1 " at $ 3 per sharepriceof StockB changedto $ 12 pricesof

StocksA , C and D changedto $ 7 , $ 20 and $ 9 respectively.

( i ) MarketCapitalizationof Stock- B before

$ 85 , 000$ 17x 5 , 000rights issue

( ii ) ApparentMarket Lapitaiizationof

$ 120, 000$ 12 : 10 , 000Stock B after rights issue

( iii ) Apparentgain in Market Capitalization 1II - ( i )of StockB after rightsissue

$ 120, 000$ 85 . 000= $ 35 , 000

$ 3 x 5 , 000 $ 15 , 000( iv ) Value of Stock B rightssubscription

( v ) Real gain in MarketCapitalizationof

Stock 8 owing to price increase ( iii) - ( iv)$ 15 , 000$ 20 , 000$ 35 , 000

( vi ) Real MarketCapitalizationof Stock B ( ii ) - ( iv) or( i ) + ( v )

$ 120, 000- $ 15 , 000or $ 85 , 000+ $ 20 , 000after rights issue$ 105, 000

( $ 7 x 20. 000) + ( $ 105, 000) + 620x 8 , 000) + ( $ 9 x 10, 000)100

( vii ) Index5$ 429, 060

$ 495, 000 115100$ 429. 060

- ( viii ) New MarketCapitalizationof

ConstituentStocks( A , B , C D ) after

$ 495, 000+ $ 15 , 000= $ 510, 000rights subscription( ix ) Assumethat rights issue of Stock B had alreadytaken place on the isase uaie ana its price had movec

strictlyin sympathywith all other stocks, then

$ 510, 000Deflated New Market Capitalizationof 100 $ 443, 478115ConstituentStocks( A , B . C & D )

adjusted Base Market Capitalizationof

ConstituentStocks for .

subsequentcomputation.

(g)Date6

StockB = ' $ 13Changein marKel pr Iue 5 StockA = $ 6 . 5

StockD = $ 9 . 5StockC = $ 22

43

( $ 6 . 5 x 20. 000) + ( $ 13x 10. 000) 1 ( $ 22x 8 . 000) + ( $ 9 . 5 x 10- 000)100Index6

$ 443, 478

$ 531, 000x 100 120

$ 443, 478

(h) Date7

Pricesof StocksA , B , C andD stoodat $ 8 , $ 13 , $ 20 and$ 10 respectively.

( 18x 20. 000) + ( $ 13x 10. 000) + ( $ 20x 8 . 000) + ( $ 10x 10. 000)Index7 100(i)

$ 443, 478

$ 550, 000x 100 124

$ 443. 478

( ii ) After that date Stock C was not used as one of the Constituentsfor index computation.

then

Market Capitalizationof

ConstituentStock( A , B & D ) ( $ 8 x 20, 000) + ( $ 13x 10, 000) + ( $ 10x 10, 000)

$ 390, 000

( iii ) Assumethat Stock C was not selectedas one of the ConstituentStockson Base Date ,

then

$ 390. 000Deflated Market Capitalizationofx 100 $ 314, 516

14ConstituentStocks( A , B & D )

adjusted Base Market Capitalizationof

ConstituentStocks for

subsequentcomputation.

Date8(i)

Changesin marketprices: StockA = $ 7 , StockB = $ 13 , StockD = $ 9 .

( 17 x 20000) + ( $ 13 x 10000) + ( $ 9 x 10 . 000)100Index8

$ 314, 516

$ 360. 000114100

$ 314, 516

Constituent Stocks of Hang Seng Index

Original List (31 July 1964) Latest List (31 December 1981)

Allied Investors1 1 Allied Investors

22 China Light China Light

3 China Provident China Provident

4 City Hotel 4 Cross Harbour Tunnel

5 Dairy Farm 5 Eastern Asia Navigation

6 Green Island Cement 6 HK Aircraft Engineering

7 Hong Kong Bank 7 Hong Kong Bank

8 Hong Kong Dock 8 Harbour Centre

Hong Kong Electric9 Hong Kong Electric9

10 Hong Kong Gas 10 Hong Kong Gas

11 Hong Kong Hotels 11 Hong Kong Hotels

Hong Kong Land12 12 Hong Kong Land

13 13Hong Kong Realty (A) Hong Kong Realty (A)

1414 Hong Kong Telephone Hong Kong Telephone

15 Hong Kong Tramways 15 HK Kowloon Wharf

1616 Hutchison Hutchison Whampoa

1717 JardineJardine

1818 Jardine Securities Jardine Securities

19 Kowloon Motor Bus 19 Kowloon Motor Bus

Miramar Hotel20 20Kowloon Wharf

2121 New World PropertiesLane Crawford (A)

2222 Nan Yang Textile Orient Overseas Containers

2323 SteluxSan Miguel

2424 Sun Hung Kai PropertiesSouth Sea Textiles

2525 Star Ferry Swire Pacific (A)

2626 Tai CheongSwire Pacific (A)

2727 Wah Kwong ShippingWatsons

2828 Wheelock Marden (A) Wheelock Marden (A)

2929 Wheelock Maritime (A) Wheelock Maritime (A)

30 Wing On30 Yaumati Ferry

addition from 17.4.69)

31HK Aircraft Engineering Winsor31

Hang Seng Bank3232 Textile Alliance

33 Yaumati Ferry33 Wynncor Co.

Source: Hang Seng Bank Research Department

45

APPENDIX III

BASIC DATA

III (a) Interest Rates Paid by Principal Banks

III (b) Daily Closing Gold Price

III (c) Daily Closing Hang Seng Index

46

Interest Rates Paid By Principal BankE

Effective from

Percent Per AnnumYear Month Date

3.505May19714.001Sep1973

5.001Aug1974

4.501Jan1975

3.501Mar1975

2.5012Mar1975

2.003Aug1976

1.7581977 Jan

2.251May1978

2.5017Jul1978

3.5030Oct1978

4.509Nov1978

5.252Jan1979

5.75201979 Mar

6.2510Apr1979

7.7520Apr1979

9.2521Aug1979

10.5011Mar1980

9.0026May1980

7.502Jun19806.5023Jun1980

5.0028Jul19805.509Sep1980

6.507Oct19807.504Nov19808.5011Nov1980

10.0025Nov198011.009Dec198012.0021Jul198113.507Oct198112.509Nov198112.0016Nov198111.0030Nov198110.007Dec1981

Source: Hong Kong Annual Digest Of Statistics

47

Daily Closing Gold Price 1972

( all figures are rounded to the nearest Hong Kong Dollar )

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

329 333 335 342 401 439 452 456 439 444 432 446

329 335 334 340 391 440 452 454 438 442 434 446

328 333 332 338 386 424 446 451 432 443 438 445

325 337 335 338 387 430 432 457 430 444 434 444

325 335 335 340 379 437 433 459 426 443 432 443

323 337 335 339 379 417 433 460 429 444 428 443

323 338 334 338 384 409 428 460 433 446 427 440

323 335 334 339 387 404 426 456 429 443 432 443

322 335 334 341 385 406 425 454 426 447 428 446

323 334 335 341 385 407 425 451 418 447 416 441

323 334 335 339 387 404 430 449 438 446 415 436

327 334 334 340 384 404 432 453 438 442 413 438

327 334 334 339 380 402 432 446 449 447 424 434

326 332 334 340 367 406 428 444 453 443 419 428

322 329 335 336 359 405 426 445 452 431 428 428

321 330 334 334 357 398 425 447 457 438 426 428

318 324 334 334 362 423 426 452 457 441 429 429

324 325 334 334 359 422 433 440 456 443 428 429

322 329 334 334 364 418 423 443 457 441 435 426

324 342 335 334 365 397 426 447 456 443 437 430

322 335 336 334 353 401 436 457 455 442 439 436

319 329 333 352 401 450 457 455 445 440 434

317 334 346 399 446 457 454 441 440 438

317 334 347 391 453 460 455 439 440 435

313 333 344 445 456 455 436 437

331 346 441

343

/ to be continued. . . .

48

( Continued)

Daily Closing Gold Price 1973

( all figures are rounded to the nearest Hong Kong Dollar )

Jan Feb Mar Apr , May Jun Jul Aug Sep Oct Nov Dec

463 509 542 562 716 743 714 640 628 616 633 687

456 499 542 561 690 740 706 655 634 610 611 678

455 514 539 561 660 745 709 644 643 615 582 682

453 509 546 556 655 743 719 636 636 617 556 658

454 526 519 561 660 727 720 634 633 626 547 652

450 494 522 560 669 724 722 608 642 625 552 646

448 481 504 558 680 728 720 638 636 626 549 650

449 484 505 559 678 738 717 625 640 629 554 653

447 474 508 544 709 733 707 665 634 637 556 659

450 473 507 552 659 726 696 650 632 633 556 644

443 476 514 559 654 747 723 658 649 636 553 646

447 470 509 567 641 727 733 635 626 642 551 641

453 482 499 563 636 740 731 596 622 639 550 631

450 479 514 564 665 740 739 578 614 639 541 634

448 490 509 558 644 711 742 635 625 642 552 635

448 481 526 559 606 724 728 646 640 640 598 650

447 486 494 559 609 710 738 658 644 638 609 646

446 481 553 593 708 751 688 645 645 611 658

447 484 547 589 707 767 696 637 634 609 658

445 474 552 577 721 761 712 646 633 608 659

444 473 548 566 712 745 707 646 644 615 663

443 476 568 738 743 714 640 620 616 663

441 567 710 738 717 631 618 619 616

444 566 722 738 714 633 615 615 628

442 564 711 717 617 608 629

440 564 627 619

564

/ to be continued. . . .

49

( Continued) Daily Closing Gold Price 1974

( all figures are rounded to the nearest Hong Kong Dollar )

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

688 781 998 1043 1014 940 855 946 943 931 998 1062

726 798 973 1052 1008 940 842 938 960 925 994 1048

724 802 989 1082 1012 921 812 926 941 944 1002 982

726 839 974 1075 1003 933 804 931 949 960 1023 999

731 847 912 1036 1005 977 820 924 946 952 1032 1015

758 833 960 1027 982 941 804 916 940 936 1067 1009

755 851 998 994 977 929 841 893 939 941 1054 1008

751 868 965 1028 959 939 867 917 920 943 1087 1012

733 878 970 1028 995 939 825 912 918 943 1100 1009

747 875 985 1045 995 931 832 904 921 939 1072 977

753 869 973 1022 990 948 831 928 923 935 1098 996

776 849 974 1020 990 939 838 932 907 930 1097 1009

763 880 974 1025 990 949 843 914 921 935 1103 1018

784 887 976 1031 983 949 843 921 904 926 1105 1041

774 894 959 1035 994 946 854 923 870 930 1108 1065

799 891 976 1039 989 930 886 927 886 935 1116 1065

846 887 1036 1037 975 924 873 927 884 942 1091 1075

848 899 1066 1015 964 927 876 935 883 943 1052 1079

823 947 1035 1013 971 892 859 928 885 988 1070 1074

813 1081 1014 967 902 865 925 885 977 1081 1120

1072 1014 936 874 877 919 890 981 1086 1097

1069 957 876 892 924 879 995 1085 1134

1045 955 904 922 874 989 1079 1142

1038 944 905 923 882 990 1049 1099

1053 931 963 934 878 1059

1042 938 922 1070

951

/ to be continued. . . . .

( Continued)

Daily Closing Gold Price 1975

( all figures are rounded to the nearest Hong Kong Dollar )

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1050 982 1004 1019 977 965 981 1001 956 857 864 834

1029 982 1004 1018 977 967 974 1000 940 863 865 831

1014 982 1005 1019 971 969 975 995 907 855 866 845991 980 988 1019 964 967 974 989 918 837 873 837

977 977 989 1012 964 974 974 991 915 829 888 834

997 978 998 1014 968 969 968 990 921 853 873 836

1020 1016 995 1013 968 973 976 977 924 852 869 8341023 1010 987 1013 971 972 976 982 913 839 870 827

1028 1003 996 1012 971 969 974 982 910 852 871 837

1025 1033 998 1009 969 972 979 983 902 858 867 838

1005 1009 998 1010 971 969 978 975 899 858 869 841

1011 1004 1003 982 972 868 979 973 900 856 862 834

988 1015 1005 982 969 968 978 980 907 866 858 836

983 1006 1010 983 972 967 977 980 899 876 852 836

966 1007 1010 997 973 967 977 979 881 869 835 835

971 1008 1008 990 978 964 977 979 866 870 848 837

998 1004 1014 980 976 964 979 979 819 879 848 836

975 1010 1010 981 989 964 983 . 978 832 876 858 868

976 1003 1012 979 996 963 981 978 793 870 854 862

988 1021 977 1004 968 981 979 793 869 852 852

1001 1017 979 1007 972 991 977 823 868 853 849

989 1018 977 1008 971 994 979 833 861 852 848

984 1021 977 993 978 1004 977 832 868 846 851

983 981 992 979 995 969 848 868 848 849

989 982 998 835 867 832 850

982 963 834

/ to be continued. .

( Continued)

Daily Closing Gold Price 1976

( all figures are rounded to the nearest Hong Kong Dollar )

Jan Feb Mar Air May Jun Jul Aug Sep Oct Nov Dec

848 777 791 763 756 740 1730 662 613 683 712 753

849 759 785 766 757 746 730 664 630 682 723 747

849 771 787 755 754 744 730 664 622 668 714 750

840 777 791 755 748 741 729 662 640 672 723 759

840 775 802 757 744 743 732 665 639 678 734 755

837 771 802 764 750 750 730 664 670 684 739 770

824 779 799 757 750 747 731 665 665 678 758 768

824 776 802 755 754 748 726 671 682 669 764 786

824 780 798 758 752 748 728 668 688 668 767 784

819 783 802 759 754 744 725 667 672 675 774 784

797 783 799 759 753 745 725 670 672 670 778 775

796 781 798 759 752 743 725 670 649 675 794 763

782 781 801 765 753 743 706 667 677 676 774 764

786 780 797 755 751 743 703 657 668 685 748 758

774 783 796 751 753 747 703 646 671 680 735 753

760 785 799 753 751 746 666 645 675 678 741 742

748 789 799 751 742 745 649 643 676 673 748 745

747 790 802 754 743 744 666 637 708 676 753 755

767 798 801 756 743 741 657 613 692 679 763 753

766 793 796 754 738 741 659 618 698 675 746 752

757 792 797 755 731 740 658 623 692 675 752 752

755 781 790 732 738 663 613 688 678 737 747

759 792 743 734 672 609 683 689 739 750

776 738 733 664 611 681 703 738 750

759 737 660 717 746

776 739 664 706

/ to be continued. . .

52

(Continued)

Daily Closing Gold Price 1977

(all figures are rounded to the nearest Hong Kong Dollar)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct. Nov Dec

738 791 820 822 805 789 807 809 860 908 888754751 737 797 834 828 799 786 811 811 863 91G 883

751 739 802 ,834 822 799 786 814 819 868 918 881

748 738 796 814 819 800 782 807 822 868 926 878

893733 739 816 820 821 796 788 812 824 858 939

894739 742 815 820 822 801 791 811 819 859 932

736 748 814 838 821 797 789 812 819 869 931 890

738 753 812 837 824 791 785 .810 818 871 929 890

722 753 815 839 823 785 789 810 822 874 930 879

727 753. 802 830 822 786 793 809 823 886 941 881

728 759 800 840 824 782 805 802 820 879 936 872.

736 760 805 836 824 777 800 804 821 877 934 885

736 759 797 832. 823 773 798 800 824 898 915 883

733 768 811 827 825 778 800 800 826 902 914 883

743 767 819 827 821 781 805 801 829 900 889 882

742 776 830 827 822 786 803 804 832 906 890 880

741 783 832 829 823 786 800 802 833 893 936 883

744 784 839 820 821 787 802 803 841 916 891 884

736 789 841 818 1821 783 805 799 847 913 874 884

738 838 813 815 791 808. 801 846 916 874 897

741 845 814 811 791 808 802 829 918. 889 906

744 851 826 811 794 .807 802 854 908 879 907

743 834 803 797 802 810 855 909 889 916

734 838 810 797 803 810 855 902 888 914

735- 836- 809 802 802 812 862 900 892

-- 824- 801----- 891-

- 828--------

/to be continued..

53

(Coninued)

Daily Closing Gold Price 1978

(all figures are rounded to the nearest Hong Kong Dollar)

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan

917 970 1009 1008 930 1026 1013 1140 1171 1221 1360 1117

922 962 1005 1007. 934 1028 1015 1133 1200 1236 1251 1128

947 965 1013 994 943 1018 1022 1125 1202 1262 1262 11400911 065 1010 998 958 1013 1021 1124 1201 1265 1226 11343

934. 957. 1013 991 951 1014 1016 1148 1207 1276 1194 1123

937 957 1019, 980 962 1014 1020 .1163 1207 1254 1220 1136

939 972 1036 981 955 1020 1030 1164 1180 1262 1245 1152

951 978. 1035 991 953 1013 1032 1156 1169 1277 1256 1179

942 984 1026 .995 959 1103 1028 1183 1161 1281 1190 1166

963 987 1037 989 968 1012 1032 1187 1180 1267 1196 1176

954 989 1019 983 972 1011 1036 1204 1176 1265 1193 1162

963 988 1034 977 968 1024 1032 1234 1193 1263 1215 1165

960 996 1022 968 973 1025 1035 1225 1197 1286 1188 1177

959 998 1019 957 983 1034 1031 1190 1197 1284 1156 1174

951 1001. 1016 963 984 1027 1033 1200 1211 1286 1144 1216

958 997 1001 940 984 1039 1035 1166 1230 1276 1154 1249

957 1005 1000 943 995 1036 1045 1149 1218 1288 1144 1262

960 995 982 936 996 1030 1063 1159 1246 1291 1149 1246

966 1001 984 930 1000 1029 1080 1112 1235 1284 1152 1243

971 1000 1004 926 1005 1025 1089 1139 1236 1306 1167 1241

972. 1004 936 1010 1024 1084 1116 1228 1321 1168 1279

969 1010 936 1003 1028 1103 1118 1238 1317 1159 1287

971 1009 933 998 1027 1109 1117 1230 1344 1150 1288

957 990 1007 1025. 1106 1164 1230 1350 1136 1304

965.992 1009 1013 1172 1376 1120

961-- 1013----- 1110-

-- 1029-------

/to be coninued...

54

(Continued)

Daily Cisoing Gold Price 1979

(all figures are rounded to the nearest Hong Kong Dollar)

Jan Feb Mar Apr May, Jun Jul Aug Sep Oct Nov Dec

1317 1442 1440 1498 1687 1715 1790 1929 2349 2274 2516

12971266 1358 1430 1436 1501 1668 1721 1770 1941 2492 2238 2539

1257 1359 1397 1435 .1495 1682 1737 1769 1970 2453 2252 2581

1283 1398 1407 1440 1499 1690 1770 1749 1970 2339 2272 2549

1263 1413 1381 1449 1498 1726 1770 1768 2049 2168 2264 2551

1281 1435 1397 1460 1505 1708 1782 1807 1984 2226 2367 2553

1274 1427 1375 1459 1508 1695 1775 1851 2034 2239 2359 2548

1253 1405 1388 1464 1492 1733 1785 1868 2047 2446 2350 2548

1258 1416 1389 1447 1516 1732 1782 1864 2040 2420 2331 2604

1239 1403 1394 1447 1515 1723 1780 1811 2025 2334 2356 2639

1236 1362 1385 1445. 1513 1692 1778 1861 2088 2369 2324 2718

1249 1404 1397 1457 1507 1712 1796 1844 2106 2397 2315 2702

1296 1414 1419 1479 1525 1708 1830 1834 2127 2364 2319 2748

1293 1421 1414 1470 1551 1716 1877 1827 2217, 2280 2324 2705

1316 1437 1419 1472 1545 1711 1849 1835 2253 2304 2323 2752

1322' 1425 1415 1490 1557 1708 1843 1830 2278 2318 2318 2800

1335 1437 1409 1498 1564 1714 1865 1875 2258 2354 2330 2785

1321 1441 1429 1494 1577 1719 1872 1879 2289 2372 2360 2791

1322 1457 1430 1490 1602 1718 1898 1909 2272 2325 2353 2870

1350 1453 1427 1476 1607 1717 1882 1893 2255 2347 2341 2870

1441 1444 1468 1595 1723 1901 1914 2215 2381 2349 2987

1432 1470 1621 1720 1893 1905 2304 2255 2343 3014

1448 1446 1650 1708 1893 1916 2362 2264 2341 3023

1432 1655 1715 1887 1918 2375 2281 2360-

1432 1676 1694 1816--- 2409-

1434 1689 1710---- 2455-

/to be continued..

55

:ontinued)

Daily Closing Gold Price 1980

(all'figures are rounded to the nearest Hong Kong Dollar)

Jan Feb Mar Apr May Jun Jul Aur Sep Oct Nov Dec

3294 3850 3746 3025 3012 3300 3893 3634 3664 4045 3810 3831

3615 3895 3771 3037 2980 3258 3904 3658 3695 3990. 3803 .3824

3585 3832 3737 2945 3007 3282 3890 3740 3726 3980 3875 3803

3717 3840 3774 2945 3050. 3382 3846 .3685 3726. 4002. 3963

3845 3958 3757 3141 3015 .3404 3880 3714 3794 3984 38E6 3787

3723 4157 3652 3293 2984 3596 3986 3698 3790 4023 3755 3378798

3510 3992 3580 3255 2993 3606 3933 3666 3847 4023 3692

755 93605 3934 3610 3205 2975 3589 3848 3545 3938 4066 3722 3365

3528 4037 3418 3195 2990. 3416 3848 3598 4014 4061 3653

3848 4090 3393 3170 2973 3440 3930 3584 3963 4077 3722 3504

3770 4440 3430 2997 2972 3548 3830 3649 4060 4055 3736 3355

3905 3985 3192 3067 3030 .3492 3668 3665 3984 3994 3739 3546.

4270 3700 3152 3045 3012 3484 3515 3595 3945 4030 3740 3575

4250 3854 2898 3045 3012 3485 3646 .3652 3908 4006 3717 3485

4650 3840 2833 3034 3004 3524 3575 3645 3967 3935 3751 3512

4776 3985 3072 2924 3002 3520 3575 3768 3935 3970 3773 3542

4770 3724 3330 3010 2990 3469 3597 3782 3975 3917 3841 3533

4798 3775 3180 3000 2985 3481 3680 3741 4045 3950 3855 3643

3600 3731 3368 3190 2982 3581 3680 3682 4141 3874 3834 3646

3920 3763 3292 3110 2999 3615 3788 3701 4216 3750 3864 3618

4020 3780 3280 3110 2994 3655 3835 .3701 4167 3814 3758 3672

3753 3201 2957 2997 3796 3850 3703 4135 3789 3805 3675

3570 2970 3000 3005 3824 3774 3710 4000 3812 3763 3654

3685 2952- 3084- 3715- 4055 3824 3771 3585

4110- 3130- 3028- 3562- 3997 3850 3781 3592

3940--- 3074---- 3850--

- 3071-------

/to be continued..

56

(Continued)

Daily Closing Gold Price 1981

(all figures are rounded of the nearest Hong Kong Dollar)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

3558 3154 3038 3234 3113 3137 2743 2994 2992 3160 2996 2735

3567 3248 2998 3269 3117 3107 2764 2758 3055 3152 2945 2727

3620 3250 3025 3331 3093 3108 2721 2787 3087 3148 2941 2786

3649 3186 2927 3305 3084 3042 2772 2789 3109 3164 2911 2827

3615 3132 2977 3325 .3124 3059 2816 2816 3096 3205 2887 2808

3507 3136 2990 3255 3103 3034 2846 2809 3114 3172 2880 2790

3538 3142 3011 3249 3114 3065 2825 2802 3082 3220 2877 2782

3526 3109 3012 3108 3167 3069 2749 2820 3120 3203 2853 2736

3490 3155 3026 3120 3263 3065 2773 2890 3218 3210 2809 2737

3482 3172. 3018 3056 3159 3093 2824 2878 3183 3170 2790 2737

3464 3170 3085 3091 3154 3102 2839 2914 3252 3183 2792 2734

3494 3240 3069 3080 3129 3100 2821 2908 3253 3190 2786 2842

3495 3193. 3107 3074 3137 3044 2810 2913 3194 3153 2784 2794

3473 3195 3142 3087 3134- 3046, 2778 2967 3247 3154 2698 2824

3452 3164 3176 3158 3133 3045, 2796 3071 3167 3152 2732 2819

3481 3183 3213 3158 3132 3027 2794 3076 3220 3112 2692 2822

3537 3140. 3174 3156 3113 3040 2781 3025 3276 3091 2720 2803

3495 3130 3375 3100 3125 3042 2793 3024 3323 3092 2694 2801

3449 3080 3339 3100 3081 3052 2802 3018 3316 3096 2673 2737

3439 3352 3083 3092 3026 2752 2924 3259 3080 2688 2736

3372- 3350 3083 3081 3002 2770 2935 3278 3051 2737 2744

3222- 3365 3071 2961 2799 2941 3138 3015 2774 2724

3280- 3468- 3064 2935- 3004 3126 3015 2796 2692

3186- 3367- 3088 2865- 3040 3158 2959 2791 2697

3169- 3331- 3126 2826-- 3110 2988 2816 2714

3160- 3230- 3133---- 2958--

Source: The Chinese Gold and Silver Echange Society

57

Daily Closing Hang Seng Index of Stock Prices in 1972

DATE JAN.. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC.

1-- 328.00 349.24 392.08 431.39-- 507.01 460.36-- .632.62 678.82

2,-- 326.08 349.80-- .395.15 433.41-- 502.09-- 500.86 623.85--

3 346.81 328.47 3'46.71-- 390.09-- 448.36 501.55-- 518.45 642.51--

4 339.78 329.77 355.21 397.71-- 456.45 496.19 467.64 514.66-- 678.10

5 343.58------ 400.06 439.48 456.91-- 472.53 515.92-- 675.12

6 341.31 343.14 362.45 450.32 458.79-- 479.62 518.90 658.30 681.40

7 342.05 329.36 346.06 366.05-- 444.54 460.26-- 473.92--. 671.75 687.83

8-- 330.94 346.94-- 397.42 433.02-- 487.80. 470.01-- 699.76 702.25

9-- 329.18 346.32-- 392.64 435.77-- 482.06-- 532.68 .727.02--

10 334.83 332.60 347.60 373.36 382.82-- 466.67 488.46-- 526.19 759.42--

11 336.27 335.38-- 373.54 ,388.27-- 468.52 485.43 464.56 535.54-- 720.08

12 336.39---- 373.15 394.49 435.11 479.70•-- 471.72 535.97-- 722.05

13 327.86-- 345.74 379.31-- 428.04 474.62-- 469.66 532.28 672.62 732.41

14 330.02 342.05 348.65 382.86-- 423.75 479.13 477.49 469.03-- 672.91 751.51

---- 344.86 393.73---- 468.80 472.02-- 690.24 743.0115

16 344.91-- 391.98 426.74-- 457.19---- 695.77--

17 330.10-- 344.96 379.73 398.65-- 488.80 462.75-- 538.10 686.80--

18 329.44 338.73.-- 381.09 399.73-- 481.94 458.41 478.81 530.61-- 746.72

19 334.95---- 380.78 398.88 434.22 491.88-- 483.33 536.20-- 747.99

20. 335.91 343.81 379.45- 433.70 493.86-- 476.57 536.34 679.27 742.49

21 335.51 340.35 343.68..--..- 432.78 494.79 442.03 475.19-- 661.26 763.71

22--. 339,02. 345.17 394.06 431.60--. 437.99 480.43-- 674.84 777.43

23-- 345.36 345.60-- 400.75 432.64-- 449.69-- 563.38 686.03

24 332.23 348.03 348.43 383.66 400.72- 482.78 444.58--. 559.93 668.51--

25 329.97 351.12-- 388.89 403.86-- 498.21 447.71 .480.22 567.42--

26 328.77---- 384.68 410.61 442.09 506.20-- 488.88 580.46----

27 323.95-- 355.37' 386.16-- 434.56 509.54-- 489.47 579.99 641.40 819.93

28 324.10 342.95 352.85 390.29-- .432.23 499.99-- 493.81-- 637.73 811.95

29-- 342.79 354.87-- 415.15 435.14-- 444.61 496.55 661.35 843.40

30.---- 354.63-- 414.75 440.06-- 443.11 623.86 664.91--

31 329.55----- 421.13-- 497.01 450.24-- 639.59

58

Daily Closing Hang Seng Index of Stock Prices in 1973

DATE JAN FEB MAR APR MAY. JUN. JUL AUG SEP OCT NOV DEC

1-- 970.69 1,690.43-- 788.48 765.29-- 675.84-- 513.57 617.09 --

2 869.14 1,098.86 11744.39 1,234.05 830.23-- 655.85,-- 510.42 620.05--

3 852.31-- 1,160.34 777.21-- 604.18 698.96 579.08 .516.58-- 503.61

4 865.99---- 1,058.94 770.61 759.21 604.65-- 558.27---- 507.72

5 884.88-- 1,770.85------ 600.66 574.46 526.07 590.36 500.81

6-- 11750.25 1,001.67-- 766.51 577.10-- 561.01-- 588.74, 472.08

7-- 1,147.09 11711. 3 2-- 751.51 754.27-- 691.42 552,60-- 578.65 462.39

8 901.29 1,267.26 1,731.64 689.92 760.61-- 680.30-- 522.84 613.74

10 970.88---- 818.39 662.92- 532.45 649.20 535.31 509.02-- 472.60

11 955.01---- 926.45 683.84. 754.68 494.45-- 520.45 499.05 470.68

12 886.70 1,503.14 1,734.90 1,000.08 - 732.92 499.77-- -- 491.77 630.80 477.25

13-- 11428.20 1,674.65 11083.15-- 707.62 502.77 624.70 506.95-- 622.50 473.52

14-- 1,418.17 1,604.25-- 742.45 695.93-- 630.03 530.09-- 619.75 450.90

15 825.94 1,406.53 1,595.50-- 739.33 655.62-- 627.15-- 499.62 603.55--

16 883.97 1,454..76 1,660,10-- 759.72 539.18 615.21-- 492.16 606.08'--

17 874.58-- -- 1,027.02 766.65.---- 636.53 515.00, 493.33-- 423.85

18 878.86-- -- 986.44 814.21 632.58 602.34-- 495.35 493.33--- 436.73

19 873.01 1,514.50 1,620.34 984.22 687.79 604.99-- 495.84 512.21 589.62 426.37

20-- 1,568.17 1,514.73-- -- 657.64 631.21 623.07 508.32 T- 583.83 417.23

21-- 1,552.16 11386.82-- 861.54 646.16-- 606.28 523.24-- 560.01 414.88

22 877.30 1,521.91 1,453.86-- 856.00 635.37-- 614.89-- 537.05 574.61--

23 911.29 1,498.02 1,417.98-- 859.00--- 680.70 626.11-- 527.40 567.15--

24 937.74---- 936.40 829.96,-- 678.47 622.43 556.13 545.91-- 400.01

25 950.76---- 902.34 784.57 619.76 661.21-- 534.65 576.57----

26 946.59 1,509.67 1,229.28 849.62-- 609.78 703.32.-- 526.21 589.78 548.80--

27-- 1,613.42 1,192.80 779.28--. 602.02 735.15-- 532.23-- 516.77 441.24

28-- 11625-63 1,285.94-- 754.91 634.74-- 611.37 532.90-- 525.81 438.37

29 958.46-- 1, 332.33-- 778.33 623.19-- 606.53-- 593.06 524.48

30 971.44-- 11301. 13 734.83 770.75-- 698.37 601.61-- 630.54 514.71

31 971.87-- 763.91-- 698.15 600.15-- 631.99-- 433.68 68

904.21 11449.91 11774.96 924.50 656.03-- 533.74 665.27-- 516.21 613.16--

59

Daily Closing Hang Seng Index of Stock Prices in 1974

DATE JANFEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

1

2

463.31 382.43 337.80 290.14341.99

223.82

432.78 323.56 300.77 392.71 340.10 244.53 216.29 165.92

3 423.13 324.14 314.04 409.51 369.83235.18 211.07 165.74

425.65 454.69 364.934 328.36404.55. 357.37 244.89 205.61 215.21 167.94

5 452.38 376.75.405.68 376.25 251.51 209.71 166.24

6. 443.21 401.53 341.1 405.99 327.67 238.91208.13 159.37

7442.01 448.63 397.31 341.00 411.06 331.78 208.14 204.31

8. 443.17 444.49 385.04 338.13 339.67 360.86 334.32212.60 203.92

9 440.62 343.46 339.26 354.76 332.01 242.72 206.31 155.38

10 433.30 337.32 335.16 432.49 347.49236.20 210.86 150.11

11 439.14 435.06 380.83 344.13 433.84 354.75 234.31 212.72 194.58 156.71

12 436.08 377.82 450.28 342.10 327.71 228.01 187.84 153.49

13 425.21 379.77 329.33 449.30 324.68 220.74 188.52 157.21

14441.82 427.52 380.70 325.22 466.45 316.87 215.95 179.56

15442.95 432.80 390.10

335.28323.67 315.60

225.70 180.99

16 457.75 336.80 335.94 331.86 309.73 207.12 234.17160.46

17 453.29 333.60 336.60 470.03 332.66 207.81 222.72 166.49

18 462.25 427.18 385.38 335.09 446.46 328.55 227.47 224.86 177.50 163.30

19 421.61 379.23 336.27 443.87 358.00 306.62 217.81 168.85 159.86

20 419.25 376.77 355.69 434.42 297.46 234.55 166.86 162.71

21 481.86 407.20 370.45 353.82 425.21 298.04 223.46 169.63

22 474.27 396.07 363.45 327.66 368.46 351.22 282.67 229.40 163.76

23 321.31 372.40 355.21 284.15 238.20 162.84

24 321.89 401.91 365.53 229.93 220.89 165.02

25 386.14 366.29 469.13 371.87 220.57 220.18 164.29

26 394.74 363.61 309.08 417.18 355.70 221.70 163.35

27 399.81 356.70 393.30 399.77 278.71 220.51 185.17 165.75

28 460.12 387.20 353.21 409.13 399.36 262.64 225.64 180.75

29 448.74 337.78 307.46 427.93 348.91 258.33 224.99 174.85

30 451.32 300.00 421.33 3.35.77 259.66 212.59 227.50 172.90

31 452.98 401.16 338.15 224.42 171.11

60

Daily Closing Hang Seng Index of Stock Prices in 1975

DATE JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

1 283.89 320.37 305.55 309.47 303.51 317.222 167.1 281.34 320.52 323.41 324.78 311.11 304.12 316.673 168.93 205.82 266.06 283.34 328.19 321.34 309.51 303.72 309.96 318.544 209.15 268.09 286.91 330.50 320.53 310.02 309.39 316.495 216.72 282.60 314.20 332.52 294.88 314.19 311.60 314.796 166.91 223.31 296.25 306.91 336.84 300.15 306.97 312.687 161.75 227.87 311.16 286.99 313.04 327.18 305.47 306.30 309.338 160.43 278.15 309.92 325.44 301.57 313.72 307.92 318.229 160.42 276.70 309.35 341.57 320.94 310.48 308.86 317-97

10 163.75 241.31 309.44 274.30 340.46 320.31 306.12 311.39 308.05 320.5911 324.78 282.20 334.83 324.90 299.85 303.17 305.43 325.7312 315.93 310.24 335.41 305.87 301.84 306.49 328.7213 169.03 294.26 316.10 333.97 302.21 311.1014 166.69 261.81 292.21 286.73 313.82 319.77 299.95 309.9315 167.78 300.32 322.91 322.58 296.69 298.63 314.66 335.4016 170.72

296.33 326.54 330.93 323.13 302.54 313.43 332.5617 171.55 263.65 294.86 300.94 329.01 328.79 300.98 316.27 310.79 335.5318 246.84 294.73 306.61 319.69 326.62 297.84 302.99 316.97 334.2519 234.51 300.27 325.93 323.86 302.74 310.49 315.70 332.1420 172.44 248.02 298.92 329.25 323.09 298.21 314.46 312.6421 176.88 242.67 286.72 336.46 325.06 295.04 316.24 311.1422 179.71 308.80 326.89 324.19 294.52 319.17 332.6023 180.18

321.01 323.64 329.59 323.42 309.19 318.69 338.1424 186.57 233.95 269.29 314.50 326.69 319.10 309.69 319.88 311.16 341.5525 245.41 250.29 324.40 324.85 319.64 315.02 312.9926 245.55 252.40 324.92 326.72

297.82 311.64 313.3027 209.62 257.41 279.38329.48 325.09 294.46 317.67 313.6628 219.53 252.67

333.64 322.58 316.99 296.43 317.82 313.5229 212.19326.85 324.62 313.91 300.14 304.58 313.56

350.9030 215.50322.61 320.94 321.20 305.13

306.40 308.38 352.9431 220.23306.77 312.27 350.00

Daily Closing Hang Seng Index of Stock Prices in 1976

DATE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

354.53

361.20

360.34

363.47

371.79

363.65

372.77

373.55

374.22

373.91

383.40

390.22

389.24

387.50

383.75

386.85

434.48

431.02

412.07

450.65

448.75

447.75

438.00

435.15

449.53

446.98

421.72

415.74

422.21

416.86

418.12

438.48

439.02

425.29

434.49

428.02

439.93

441.71

451.83

446.74

410.76

405.24

399.82

404.534

409.33

418.76

413.01

424.08

423.39

416.19

415.92

414.50

410.29

403.51

418.36

411.89

416.12

413.51

422.54

451.86

455.62

465.33

458.69

464.67

428.41

386.66

382.15

386.54

381.19

374.41

R96.R7

418.67

385.44

R7R.09

422.58

422.06

414.83

417.97

416.97

378.74

390.44

383.34

388.22

495.94

405.40

406.40

396.08

401.67

401.35

418.10

415.88

415.09

412.58

410.42

407.67

405.97

402.74

407.32

408.49

407.75

410.87

409.55

409.97

409.74

397.36

394.84

405.55

411.49

423.50

426.28

433.27

440.81

446.99

448.14

456.12

448.00

454.39

445.78

442.01

437.63

430.59

426.56

423.79

424.71

426.57

426.29

455.40

451.89

455.78

364.64

368.54

381.08

382.46

381.33

401.95

405.22

409.00

412.80

406.18

403.79

402.84

402.32

405.33

406.57

404.36

403.92

ADA 99

417.24

412.86420.03

392.74

390.68

394.52

401.04

398.25

402.22402

411.04

412.21

406.80

404.21401.02

428.45

428.36

4R5 69

414.69

399.55

400.98

402.99

405.26

398.61

394.95

397.74

395.82

403.83

400.82

401.21

397.85

R96 R1 413.55

408.30

407.48

416.17

420.16

392.45

384.20

394.21

389.84

RRO.96

417.22

416.71

420.48

415.85425.16

387.56

385.47

385.96

388.62

394.04

395.44

396.75

396.16

393.38 421.73

417.28

420.19

420.28416.83

385.14

387.87

385.62

387.92

400.25

390.03

391.12

390.77

397.38

R99.99

429.52

434.91

434.26

439.26

388.71

387.14

385.63

386.83389.50

416.04

412.84

409.66

408.59

396.44

392.51

391.12

392.48

389.73

413.06

400.95

400.77

437.99

439.99

446.49

447.67

Daily Closing Hang Seng Index of Stock Prices in 1977

DATE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

451.00

444.20

447.08

441.58

441.34

436.69

439.18

433.76

437.98

438.49

436.54

438.74

439.52

442.40

442.33

441.12

438.52

438.01

433.31

433.41

434.25

431.02

432.58

433.39

435.92

444.65

445.20

442.32

439.54

440.82

436.16

436.58

439.61

443.73

439.77

434.38

430.34

425.42

427.76

433.28

433.20

429.06

427.93

422.88

418.66

419.06

422.66

419.11

415.45

419.26

419.97

418.31

416.19

415.61

419.55

421.87

419.37

420.06

418.86

417.71

416.15

417.27

424.59

430.95

428.07

430.14

430.43

435.56

434.40

436.66

446.31

439.63

445.46

448.74

444.46

442.75

442.50

443.53

441.94

440.23

439.96

442.02

445.04

443.98

446.37

447.65

452.17

450.91

451.29

448.85

447.12

447.38

445.96

443.97

440.70

441.43

442.51

441.13

441.94

438.67

438.96

443.32

447.60

450.22

448.04

446.10

446.07

448.42

448.30

445.89

443.65

441.70

438.39

439.76

440.08

436.64

437.21

436.43

434.59

436.02

438.12

439.59

436.82

435.45

437.16

436.80

435.98

435.64

436.65

435.74

431.87

431.31

427.98

422.78

426.32

422.48

419.30

418.47

414.03

413.50

414.94

417.85

416.02

414.13

414.12

416.79

421.43

425.82

424.45

421.08

419.26

418.27

419.01

418.68

420.01

419.36

421.03

421.13

421.80

421.95

427.83

430.22

427.73

429.05

435.18

433.73

431.10

427.74

428.79

429.95

428.99

427.75

428.15

427.49

424.62

420.47

420.48

420.93

419.43

418.17

415.70

417.08

416.43

417.09

420.01

425.40

425.51

425.42

423.48

421.49

421.63

420.55

418.81

416.89

416.36

419.17

419.05

418.17

417.86

413.54

414.18

414.64

415.51

417.79

422.27

432.23

436.84

434.80

426.36

433.93

432.43

429.94

434.49

432.76

430.77

430.80

426.98

425.51

422.40

422.37

424.67

419.90

420.34

418.13

418.16

419.29

420.57

421.72

421.13

421.85

421.09

419.17

419.15

417.77

418.21

418.90

416.26

416.41

414.82

411.97

411.03

409.23

405.95

406.24

405.34

404.02

Daily Closing Hang Seng Index of Stock Prices in 1978

DATE

1

2%

3

4

5

6

7

8

9

10

11

12

13.

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

393.74

388.29

392.59

394.82

391.90

390.16

388.39

384.41

383.44

389.71

392.37

397.06

402.18

400.27

405.65

410.18

405.57

402.27

406.65

406.74

405.32

404.04

405.68

411.03

411.88

410.23

411.08

409.58

405.74

407.80

410.06

412.08

410.81

409.48

409.02

411.45

414.74

413.03

410.95

412.65

421.62

420.68

421.80

420.51

419.93

420.91

421.42

420.65

418.42

417.83

423.45

428.38

434.57

435.27

438.53

443.81

446.41

444.08

449.44

451.54

451.67

445.35

447.17

446.80

449.63

445.69

442.13

436.96

434.29

441.18

442.86

448.91

448.82

455.09

459.91

456.02

460.23

461.83

459.39

456.25

456.10

457.17

455.24

451.36

451.97

449.77

450.42

452.33

457.96

460.81

458.82

462.15

465.65

466.37

471.14

470.19

468.70

464.31

469.31

472.57

477.25

479.85

484.17

488.72

494.22

505.28

517.04

518.80

513.77

528.26

546.54

544.26

562.31

552.48

540.72

549.72

548.08

536.95

541.04

544.85

548.56

556.88

567.28

564.72

574.72

582.67

581.32

573.13

580.42

574.77

565.69

567.38

557.22

549,31

556.97

554.94

557.09

571.96

578.02

581.86

584.42

593.13

592.96

592.43

600.75

615.64

621.58

614.38

624.22

631.54

647.98

643.54

660.42

680.12

657.00

634.42

649.70

666.40

661.41

664.51

678.56

679.82

696.43

707.79

692.28

687.41

700.39

697.25

680.91

689.31

676.27

661.49

642.60

623.76

642.57

628.21

610.17

618.73

632.47

637.77

645.27

633.14

616.92

622.53

612.60

602.28

614.93

618.68

618:46

638.65

639.14

643.78

638.57

633.05

644.46

644.90

662.01

666.75

670.35

671.73

673.31

688.32

673.11

677.81

668.35

657.35

648.62

628.76

600.38

565.41

575.09

537.16

549.20

538.56

516.99

488.48

468.45

486.16

513.91

503.70

484.72

501.14

490.94

497.04

499.43

500.74

520.07

516.93

525.08

521.99

522.72

518.94

513.81

503.11

507.59

508.02

496.34

491.47

498.79

502.23

511.36

503.70

500.09

495.51

Daily Closing Hang Seng Index of Stock Prices in 1979

DATE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25'

26

27

28

29

30

31

JAN FEE MAR APR MAY JUN JUL AUG SEP OCT NOV PEC

493.83

496.49

507.19

506.46

504.52

507. 75

515.28

528.59

532.89

525.39

545.82

540.44

540.37

535.64

531.25

536.28

535.22

534.81

543.06

549.46

554:94

568.90

562.22

553.53

545.52

533.06

528.93

530.01

530.37

538.95

531.24

509.92

521.46

514.99

515.95

506.66

511.17

518.93

526.87

517.34

522.00

529.00

533.67

529.27

528.28

533.74

35.01

5J8.21

540.27

548.08

551.06

555.92

559.39

552.87

549.80

554.48

555.56

543.48

541.67

537.93

537.66

529.54

518.59

519.44

531.43

534.55

530.02

529.07

529.65

535.29

539.58

530.54

534.479

534.65

530.36

529.21

529.00

530.84

537.82

539.64

538.67

538.56

545.27

550.24

552.73

553.84

551.39

544.37

543.72

547.69

550.27

554.71

565.16

9

568.64

562.56

561.83

559.19

562.96

558.72

564.25

562.96

557.30

554.14

556.96

556.68

553.24

552.30

547.26

545.53

541.00

540.79

543.79

546.22

541.89

539.24

534.89

528.62

531.61

536.37

536.65

536.67

539.32

535.91

537.31

536.63

533.19

544.73

550.28

553.34

553.92

551.60

548.99

551.54

557.83

567.05

578.46

598.45

592.49

594.80

600.21

623.21

624.40

605.23

616.63

608.59

603.73

614.54

620.10

620.98

625.78

619.89

613.47

615.89

614.08

591. 81

578.17

590.09

573.03

572.71

575.50

580.88

577. 39

581.77

580.20

582.53

593.20

589.73

596.47

594.34

589.05

593.19

595.32

595.91

599.87

606.20

606.80

612.34

615.81

632.44

642.60

668.29

663.70

685.83

677.74

680.95

685.88

672.65

681.91

675.63

661.71

645.27

645.96

639.75

653.34

655.02

650.96

657.74

C69.61

662.25

658.14

657.80

654.75

668.48

662.22

674.18

684.09

698. 10

727.40

717.25

696.55

713.95

712.32

713.86

724.95

744.45

736.77

728.01

718.89

720.09

709.94

717.19

715.28

724.96

748.40

748.59

754.09

762.45

775.33

761.59

772.12

779.73

783.02

784.48

800.04

797.90

790.02

794.78

818.45

822.42

799.48

824.84

831.01

840.29

839.62

852.10

879.38

65

Daily Closing Hang Seng Index of Stock Prices in 1980

DATE JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

1 893.77 784.95 863.88 1144.27 1239.85 1240.60 1441.822 889.13 791.93 854.22 901.67 1037.71 1224.56 1243.87 1361.393 862.06 891.62 786.98 89939 1067.22 1237.15 1256.16 1557.49 1308.014 848.84 920.61 878.97 906.07 1057.19 1216.62 1556.44 1373.765 927.40 857.51 858.40 925.49 1120.38 1212.71 1587.09 1382.516 914.95 865.28 867.81 931.76 1142.92 1296.15 1582.857 816.18 911.35 833.69 861.56 1085.75 1140.26 1318.47 1545.778 848.32 907.78 773.83 878.88 1071.84 1129.49 1174.50 1318.46 1398.519 850.75 775.19 883.85 950.05 1081.44 1169.72 1340.46 1386.0810 853.21 816.60 785.04 955.94 1083.79 1211.13 1357.18 1542.53 1340.28

11 846.47 909.67 832.86 800.20 951.99 1101.14 1135.76 1212.37 1586.39 1262.2012 934.03 83.5.63 889.62 971.30

1136.41 1220.36 1628.13 1222.1613

937.24 800.96 902.48 969.16 1162.80 1368.82 1654.5714 842.51 961.21 767.43 806.81 900.78 1104.56 1172.84 1364.83 1639.2515 833.86 963317 791.70 910.84 1097.04 1177.37 1230.73 1404.00

1307.3816 842.29798.27 900.29 981.12 1059.89 1222.93 1430.04 1265.3017 860.94 783.30 814.71 1077.74 1244.83 1611.98 1253.6618 854.87 747.76 822.86 983.24 1090.84 1180.96 1253.76

1587.83 1250.7619 738.92 897.80 967.94 1168.16 1282.88 1614.61 1291.9320 949.89 766.49890.96 987.96 1168.42

1439.35 1576.2821 873.82 943.44 764.68 890.98 1106.37 1195.04 1394.43 15.1822 884.91 929.55 840.12 900.77 1213.32 1313.78 1451.821359.3723 878.56 844.88

897.07 1012.01 1128.07 1308.12 1434.52 1446.1824 901.27 765.33 866.37 1014.20 1130.371462.11 1481.51 1462.7225 920.01

902.20 758.13 854.191007.51 1147.10 1283.76 1494.4126

894.99 762.96 898.38 1026.69 1226.03 1261.76 1523.6927876.15 766.23

876.54 1041.43 1218.531479.36 1466.0928 926.08 918.74 783.22 863.15 884.96

1156.62 1201.161471.93 1445.5129 936.83 914.91 875.85 883.43

1158.12 1221.12 1227.22 1451.38 1445.0830 913.59867.90 894.32 1066.84 1168.74 1213.68 1436.50 1486.74

31 907.501166.55

1498.86 1473.59

Daily EHang Index of Stock Prices in 1981

JAR FEB MAR APR MAY JUN JUL .AUG, SEP OCT NOV DEC

DATE 1------ 1387.76 1439.,23 1718.01---- 1647.65 1259.16-- 1431.10.

2 1524.86 1608.70 1451.04 1408.85--. 1731.11 1727.78.-- 1611.57. 1233.26 1370.90. 1420.19

3-- 1641.00 1420.03 1409.06 1711.87. 1745.72-- 1587,63'-- 1377.51 1399.82

4-- 1650.62 1459.85-- 1428.56 1681.17-- 1681.65 1597.54.-- 1380.16 1409.92

5 1599.91-- 1392.43,-- 1413.47 .1715.81-- 1689.67-- 1113.77 1420.05--

6 1604.68-- 1390.68-- 1420.34---- 1722.46--. 1395.92--

7 1610.56---- 1380.08 1413.49---- 1718.15 1564.12 1179.83--. 1423.82

8 1570.04---- 1347.11 1431.11 1697.50 1741.04-- 1518.90 1266.52-- 1414.71

9 1605.63 1635.14 1347.35 1325.05-- 1718.07 1747.20-- 1519.49 1302.42 1384.29 1403.86

10.-- 1622.15 1371.42 1356.06-- 1734.25 1777.13 1683.82 1515.88-- 1435.47 1412.99

11-- 1604.05 1295.44.-- 1450.91 1754.53-- 1644.94 1533.85--, 1436.44 1413.19

12 1630.72 1575.95 1347.48-- 1460.49 1780.55-- 1668.15-- 1335.21 141 .43--

13 1596.27 1573.67 1323.26 1350.85 1482.62-- 1781.07 1679.32-- 1312.97 1433.82.--

14 1589.83---- 1332.81 1532.05-- 1779.37 1694.75.-- 1289,24-- 1376:39

15 1612.08---- 1338.89 1548.21 1752.35 1780.69-- 1554.92 1265.72-- 1381.18

16 1619.47 1537.46 1344.37 1360.84-- 1761.15. 1781.62-- 156309 .1249.47 1443.06 1376.15

17-- 1526.51 1375.32--.-- 1728.57 1810.20 1689.27 1502.79,-- 1386.31 1342.98

18-- 1550.29 1390.85-- 1562.23 1743.11.-- 1706.54 1493,15-- 1397.80 1334.7519 1591.14 1547.42 1439.76-- 1554.37 1705.48-- 1728.71.-- 1230.87 1395.39--

20 1591.66 1502.08 1426.87-- 1585.10-- 1777.92 1705.73- 1227.72 1401.75--

21 1546.06---- 1352.94 1606.63--. 1732.38 1715.84 1431.68 1252.81-- 1370.13

22 1532.27---- 1344.94 1596.62 1677.36 1732.94--. 1404.71 1236.12-- 1353.11

23 1531.42 1492.21 1467.88 1374.86--. 1706.95 1698.73.-- 1331.01 1227.24 1416.18 1361.48

24-- 1519.24 1446.71 1428.31-- 1708.90 1688.56 1717.27 .1322.69-- 1398.08 1375.59

25-- 1532.20 1468.30-- 1588.90 1683.09-- 1705.16 1351.01- 1428.68--

26 1540.85 1500.19 1450.51-- 1633.35 1707.57-- 1689.78-- '1223.06 1439.95--

27 1580.19 1487.88 1441.66-- 1636.27-- 1664.81 1674.47-- 1231.54 1451.Q7--

28 1593.40---- 1442.08 1624.34-- 1660.52 1672,84 1245.26 1270.28-- 1406.11

29 1584.43---- 1441,42' 1667.34 1739.94 1218.20 1281.71..-- 1412,78

30 1588.08 1377.79 1424.26-- 1734.36 1699.39--. 1280.13- 1450.22 1415.31

31-- 1369.65-- 1719.84---- 1405,82

67

APPENDIX IV

BUY AND HOLD

IV (a) Rates of Return(% p.m.)

IV (b) Correlation Coefficients and F-valueE

IV (c) F-tests on Buy and Hold

68Kates of Return

Saving deposit Gold investment Stock marketMonth

-10.7129015.795400.2916706/73-10.908600.338380.2916707/73

4.636000.2916708/73

3.48749 15.932000.3333309/73

-0.994230. 33333 -4.0923010/72

-7.1693011/73 14.2426010.33333-21.7832011.367100.3333312/73

-1.0922517.714900.3323301/74-4.776891 .526.400.3333302/74

-11.5073016. 446200.3333303/74-12.063800.3333304/74

5.35683 8.6031905/740.33333-4.86154 20. 548600.3333306/74

-7.57511 -17.127300.3333307/74-12.596907.50720.4166706/74

-1.56352 -24.637600.4166709/74-3.806394.542850.4166710/74-14.3425012.411400.4166711/74-12.00490-1 .974020.4166712/74

-4.72457 11.781800.3750001/75

0.26658 32.817800.3750002/750. 43580 21.455900.2379003/75

-0.80014 3.893350.2083304/75

-1.819847.579030.2083305/75

-1.39867 3.192800.2083306/75-2.213211.653950.2083307/75

0.08669 -6.291160.2083308/75-10.50630 3.14970.2083309/75

-2.04862 1.879050.206331 0/7 5-0.31140 0.0585:11/75 0.20833

-1.920846. 385080.2083312/75

-5.19798

16.068400. 2083301/76-2.08715 10.591400.2083302/76

1 .61825 6.906910.2083303/76-4.60358 -4.100020.2063304/76

-1 .36558 -7.14090.2083305/76

-0.50479 0.765250.2083306/76

-6.154123.378640.2083307/76

-6.94486-2.667250.1693608/76

3.06201 4.974580.1666709/76-4.987551 .744940.1666710/76

-20.8727026.085300.166671 1 /76

-1 .92084 6.360030.1666712/76-12.18800 33.484800. 1505401/77

2.46170 -0.328000.1458302/77-3.246858.248470.1458303/77

4.397020.946850.1458304/77-1.03346 1.806310.1458305/77

-0.17205445410.1458306/770.81967 0.348330.1458307/77

-3.358701.149250.1458308/773.00174 0.1173E0.1458309/77

-0.900236.999040.1458310/772.35223 2.231420.145831 1 /77

-2.25858 -2.417700.1458312/77-3.984937.122450.1458301/78

3.27246 3.714370.1458302/782.86876 4.630190.1458303/78

-4.31512 5.260470.1458304/781.17986 3.160380.1875005/78

-9.70855

69

Rates of Return (% p.m.)

Saving depositMonth Gold investment Stock market

0. 1 6750O8/78 4.79818 14.660401.9418907/78 0.19758 8.54700

0.2083306/78 12.38390

0.20633

10.82830

09/78 3.87130

-2.3883710/78 0.21371 8.59723

-10.6471011/78 0.35278 - 14.08960

-7.1568912/76 0.37500 4.28782

7.3208801/79 0.43546 3.31657

0.43750 9.9443702/79 2.16389

0.1620503/79 0.45363 1.88685

-1.432753.3353104/79 0.55417

6.3937905/79 0.64583 4.67259

9.807290.6458306/79 1.35161

6.499840.6458307/79 4.92679

0.69019 1.3962508/79 5.66014

16.0343009/79 0.77083 2.4657010/79 0.77083 9.12445 8.71027

-0.202440.7708311/79 9.42925

12.0477012/79 0.77083 11.94670

0.77083 50.2358001/80 8.29027-0.325840.7708302/80 5.93540

-14.40930 -12.513500.8414003/80

-6.206420.8750004/80 2. 10553-2.141900.8508105/80 8.59279

0.60694 16.7107006/80 10. 096800.52554 7.3836307/80 13.74610

-2.529200.4166708/80 6.37669

0.44722 7.4258209/80 5.79954

0.52554 0.0354710/80 12.21900

-4.1865011 /80 0.69722 13. 06870

-3.52261 -12.849000.8951612/80

-5.4656101 /81 0.91667 16.77040

-8.21411 -1.164460.9166702/81

-0.22511 -10.103900.9166703/81

-1.289050.91667 0.1009404/81

0.91667 -1.3593105/81 11. 09090

-2.714410.91667 12.9884006/81

-8.111200.9444207/81 1 .2021

-2.375071.00000 1.4282408/81

-13.182901.00000 12.2161009/81

-14.236301.10083 -1 .9824110/81

-9.945441.0402511/81 18.34580

-1.30456 -5.599340.8495012/81

103 months' average (Percent Per Month)

1.780.42 1.46

4.00511

70

Correlation Coefficients and F-values

1. Stock yield versus saving yield

Stock yield=R(0)+R(1) Saving _yield

A(0) 0.35155550A(1)= 1.307843

Correlat for 0.009481F 0.411979

Time lag= 1 month

A(0)= 1.814855

R(1) 0.815607Correlation= 0.048705F= 0.362115

Time lag= 2 months

A(0)= 2.163552

A(1)= 0.710110Correlation= 0.056894F= 0.708990

2. Stock yield versus gold yield:

Stock_yield=R(0)+R(1)*Gold_yield-0.167791R(0)=

R(1)= 1.769641-0.154494Correlatior

F 60.660990

3. Gold yield versus saving yield:

Gold vield=A(0)+R(1)*Savimt yield

A(0)= 0.255395A(1)= 1 .671237Correlation 0.008372F 1 .221260

Time lag= 1 month

A(0)= 1 .086505A(1)= 1. 188953Correlation= 0.035678

F 0.157605

Time lag= 2 months

A(0)= 1.065963

R(1)= 1.300195Correlation= 0.0344 10F 0.201104

71

Correlation Coefficientsand F - values

4 . Stock yield versusointof savinq yield & gold yield :

Stockyield= H ( 0 ) + H ( 1 ) Savingyield+ R ( Z ) * Goldyield- 3 . 036147H ( O)

10 . 762750A(1)- 0 . 018483A ( 2 ) =

0 . 290522Correlation

3 . 928641F

Time lag = 1 month- 3 . 337742A( 0)

11 . 914430A ( 1 ) =- 0 . 028032A ( 2 ) =

0 . 319752CorrelationF = 4 . 753164

Time lag = 2 months- 3 . 567084R ( 0 ) =

12 . 725341A ( 1 ) =- 0 . 030662R ( 2 ) =

0 . 334707CorrelationF = 4 . 753164

72F-tests on Buy and Hold

The following hypotheses are tested:

Ho the regression is not significant

Hl the regression is significant

F

regression value of independent variablewhere

mean value of independent variable

observed value of independent variableY

no. of constants in the reqressionk

no. of observationsn

no. of degrees of freedom in the numeratork-1=vl

of the F-ratio

no. of degrees of freedom in the denominator

of the F-ratio

level of significance

103In our case, n

2 for simple regressionk

3 for multiple regressionkand

k= 3k= 2

21k- 1vl

100101n- kv2

F-values from table

0.05 0 .01

3.94 6.90simple regression (1,101)

4.823.09multiple regression (2,100)

n-k=v2

Yc

Y

73

APPENDIX V

SYSTEMATIC SPECULATION

V (a) Flowchart for Systematic Speculation

V (b) Comparison Summary: Gold

V (c) Comparison Summary: Stocks

V (d) Gold Investment: Buy & Hold versus

Systematic Speculation

V (e) Stocks Investment: Buy & Hold versus

Systematic Speculation

V (f) Month-end Values (HK$) of Gold Investment

V (g) Month-end Values (HK$) of Stock Investment

74Flowchart for Sstematic Seculation

START

SET INITIAL

VA LLES

C

READ

NEXT DATA

ISYESEND of 1NPOT

STOPDATA

NO

NODIENDPER

MARK DfTECTEP

YES

CALCuLl1TE TOTALIS\ No

(jJ PvrrHAsEDASSET AND 8

PRINT PESULT

YES

-A

/to be continued.

ZERO

75(Continued

A

3S

YESDATA C MINIHOM VAUE

STORE

NO

I MI,IKUM VALUE/n

= DATA YALuENO RT BUY LtVEI

YES

UNIT Pur CNAsED

I BOY LEVELCASK

BUY PEECEWTAEEDATA VALUE

HIJINUFM VALUE

0CAS H

I MAX1M VALUE

DATA VALUE

SELL LEVEL

Scit PFCCEN1AIE

X MAXI Hl1K VALUEI

C

/to be continued.

76(Continued)

B

YESDA1A) MAXIMUM

ll VALUE.

NOI MAxIHUp1 VALUE

DATA VALUEIs

NODATA SELL LEVEL.

YES

SELL LEJFL

SELLPECCE+JTACaECASH

MAXIMUM VALUEUNIT PAP CHASED

X DATA VALUE

UNIT PUHASEC

0

MINIMUM VALUE

DATA VALUE

BUY LVEL

BUT PEL CEN1A E

X PILMI)K VALVE

c

77Comparison Summary: Gold

Compared with Buy and Hold

0 3% 0 5% 0 7% 10%

Number of months for which

Systematic Speculation yields

a higher month-end value than

2 122Buy and Hold

Number of months for which

Systematic Speculation yields

the same month-end value as

100 0Buy and Hold

Number of months for which

Systematic Speculation yields

a lower month-end value than

118 118118 118Buy and Hold

120 120120120

Comoared with Original Value

BuySystematic Speculation

and

10%0 7%0 5%0 3%Hold

Number of months for which

the month -end value of

investment is above the

42 8342 51118original value

Number of months for which

the month -end value of

investment equals the

1 4111original value

Number of months for which

the month -end value of

investment is below the

1 77 68 3377original value

120 120120120 120

78Comparison Summary :.Stocks

Compared with Buy and Hold

5%% 7%0 3%

10%

Number of months for which

Systematic Speculation yields

a higher month-end value than

108 107112l10Buy and Hold

Number of months for which

Systematic Speculation yields

the same month-end value as

0710Buy and Hold

Number of months for which

Systematic Speculation yields

a lower month-end value than

135710Buy and Hold

120120120120

Compared with Original Value

BuySystematic Speculation

and

10%0 7%0 5%0 3Hold

Number of months for which

the month-end value of

investment is above the

11711811911999original value

Number of months for which

the month--end value of

investment equals the31110original value

Number of months for which

the month-end value of

investment is below the010021original value

120 120120120120

79

Gold Investment: Buy Hold versus Systematic Speculation

(Month-end values of investment under Systematic

Speculation are expressed as percentage of the month-

end values under Buy and Hold)

Buy

Systematic SpeculationandMonth 10%7%05%3%HoldYear,

105105105105100Jan1972100989994100Feb

99989993100Mar99989990100Apr86104109101100May67848581100Jun58737067100Jul58737065100Aug58696865100Sep58696765100Oct5465676 5100Nov5567 6564100Dec

50636559100Jan197350646853100Feb45566054100Mar45515547100Apr51556041100May39424530100Jun39424430100Jul38383935100Aug38383833100Sep38383632100Oct40403935100Nov394n 4034100Dec

36373729100Jan197436343427100Feb36313324100Mar36313224100Ap r36333324100May39353425100Jun39363426100Jul39343325100Aug39333427100Sep39313224100Oct39313122100Nov36283223100Dec

/to be continued

80(Continued)

(Month-end values of investment under Systematic

Speculation are expressed as percentage of the month-

end values under Buy and Hold)

BuySystematic Speculationand

10%7%/Month 5%3%HoldYear

37303224100Jan197E36303124100Feb35293124100Mar37303124100Apr37313223100May37313123100Jun37313123100Jul37313123100Aug40333527100Sep38323527100Oct38323527100Nov38323426100Dec

4C353829100Jan197639343728100Feb39333728100Mar4C333729100Apr41343830100May

343830100Jun 42

374233100Jul5C414635100Aug45,374032100Sep45373832100Oct45363831100Nov45363630100Dec

45373731100Jan197745353630100Feb45353630100Mar45353629100Apr45353630100May45343630100Jun45343630100Jul45343530100Aug45333530100Sep45333530100Oct45333329100Nov45323228100Dec

/to be continued

46

81(Continued)

(Month-end values of investment under Systematic

Speculation are expressed as percentage of the month-

end values under Buy and Hold)

Buy

Systematic Speculationand

10%7%5%3%HoldYear /Month

45313228100Jan197845313228100Feb

45313228100Mar45313430100Apr40293229100May40293229100Jun40273128100Jul40263029100Aug40253028100Sep40253028100Oct45293330100Nov40263129100Dec

40262928100Jan197940262727100Feb40262627100Mar40262627100Apr40262627100May40262627100Jun40262627100Jul40242526100Aug40242524100Sep35212425100Oct35202324100Nov35202324100Dec

29172021100Jan198030182121100Feb35222628100Mar35222826100Apr34222526100May27182021100Jun29202221100Jul28192221100Aug26182120100Sep26182220100Oct27192221100Nov28202320100Dec

/to be continued

82(Continued)

(Month-end values of investment under Systematic

Speculation are expressed as percentage of the month-

end values under Buy and Hold)

Buy

Systematic Speculationand/Month 10%7%5%Hold 3%Year

20 302324100Jan1981

31191924100Feb

261722 17100Mar

24151521100Apr

24151521100May

31191828100Jun

29171629100Jul

26161525100Aug

26171625100Sep

26171626100Oct

27181627100Nov28181627100Dec

Source: Computed by the writers from Appendix III (b)

83Stocks Investment: Buy Hold versus Systematic Speculation

(Month-end values of investment under Systematic Speculation are

expressed as percentage of the month-end values under Buy and Hold)

BuySystematic Speculationand

10%7%5%3%HoldYear /Month

1051051051051001972 Jan101100101104100Feb

98100101104100Mar96100101104100Apr9610010199100May961009897100Jun961009697100Jul97104103106100Aug91999999100Sep91999999100Oct9210010090100Nov85979890100Dec

839498901001973 Jan77949282100Feb9211712079100Mar

147210223148100Apr120209224170100May147237253196100Jun152274282220100Jul166308295222100Aug179333334239100Sep164318332241100Oct178331365272100Nov208387427300100Dec

2083874232911001974 Jan 228443495316.100Feb261408537357100Mar

526 295566390100Apr259502541381100May2 6.5546561395100Jun296605610445100Jul373787793579100Aug413816882648100Sep376769.821613100Oct422883982704100Nov4228831074756100Dec

Ito be continued

84(Continued)

(Month-end values of investment under Systematic Speculation are

expressed as percentage of the month-end values under Buy and Hold

Buy

Systematic Speculationand7% 10005%3aHoldYear /Month

42282110297201001975 Jan392751100 886650Feb390791934685100Mar390791934661100Apr390738908668100May390738905664100Jun387762946694100Jul396780968687100Aug389100 765934650Sep381741934623100Oct379741934613100Nov365741936613100Dec

3657419346131001976 Jan365684907604100Feb

'100 365684907584Mar354683907595100Apr375723931665100May372723874660Jun372723974662l0 lOCJul372683849649lOCAug372670847641lOCSep366694866652lOCOct356675866631lOCNov34065586663110CDec

3406558666311001977 Jan340655860619100Feb340652883635100Mar 842 340610614100Apr340610842614100May340610842610100Jun340611862642100Jul340597842627100Aug340613864632100Sep340611862630100Oct340610874614100Nov

33 342814637100Dec

/to be continued

85(Continued)

(Month-end values of investment under Systematic 5peculaLiun dL C

expressed as percentage of the month-end values under Buy and Hold)

BuySystematic Speculationand

10%7%5%3%HoldYear, /Month

3416318376481001978 Jan334622837648100Feb327622837648100Mar327622837631100Apr327622837631100May327622837613100Jun327622795597100Jul327622742589100Aug323632761634100Sep30C620717612100Oct368758879801100Nov353758844789100Dec

3537597917571001979 Jan3427348007 84100Feb322706790784100Mar322681778781100Apr322648761781100May322648761793100Jun322648735777100Jul322644748762100Aug322608718748100Sep322608687739100Oct322608687683-100Nov322608687683100Dec

3225686516841001980 Jan322556642678100Feb353649750778Mar .100

'778 339642750100Apr339642750763100May339642750753100Jun

642750 339722100Jul339642750695100Aug339642724701100.Sep339591678651100Oct348606735715100Nov370645747755100Dec

/to be continued.

86(Continued)

(Month-end values of investment under Systematic Speculation are

expressed as percentage of the month-end values under Buy and Hold)

Buy

Systematic Speculationand10%7%5%3%/Month HoldYear

3706457 277391001981 Jan370662742782100Feb373708807869100Mar373668774866100Apr373668774866100May373668749849100Jun373646722855100Jul373664718830100Aug4698689041042100Sep4748428431105100Oct4747887881072100Nov4747527721091100Dec

Source: Computed by the writers from Appendix III (c)

87Month-end Values (HK$) of Gold Investment

BuySystematic Speculatior

and3.O l007%5%Ho1cYear/Month

10,00010,00010,00010,0009,5141972 Jan10,0009,7639,8809,36010,000Feb10,0009,8229,9409,36010,062Mar10,0009,91110,0309,14110,152Apr

8,95310,89011,38110,56410,426May7,97410,02210,1479,57E11,884Jun7,8509,8679,5019,05113,526Jul8,04410,111917369,01013,860Aug8,0279,5729,3479,01113,830Sep7,6919,1728,8548,57713,252Oct7,2868,7518,9768,67513,404Nov7,2868,5358,8548 ,41913,222Dec

6,9248,6348,9558,14713,7341973 Jan7,3969,43810,0557,84214,772Feb7,0148,7769,3508,37415,623Mar7,4788,5589,1177,82016,657Apr8,7479,50710,2067,07317,143May8,3709,0989,7256,51121,611Jun8,6889,4439,7916,69222,432Jul8,3628,2878,5937,52021,793Aug7,3247,2597,3756,28419,240Sep7,3247,2596,9416,02819,058Oct7,5827,5147,3196,52318,815Nov7,5457,6597,7096,49119,119Dec

8,9169,0519,1107,24524,7111974 Jan 10,3859,8149,8787,89028,784Feb11,4279,86810,3267,70431,672Mar11,1209,4139,8757,26930,821Apr10,5179,413.7,043 9,56428,906May10,5179,4139,0456,78326,626Jun10,94410,0109,6187,18428,024Jul11,0869,6969,3167,23028,389Aug10,4228,7878,9607,12226,687Sep11,7519,2159, 5287,12930,091Oct12,7019,9597,31732,523Nov11,8729,432

10,125

7,67133,404Dec

/to be continued,

10,685

88(Continued)

BuySystematic Speculation

and10%7%05%03%HoldYear Month

10,9549,0129,5967,31229,8481975 Jan10,9549,0129,4747,46830,486Feb10,9549,0129,6447,35631,033Mar10,9549,0129,2567,07529,818Apr10,9549,0129,2566,84129,270May11,0789,1149,3616,91829,757Jun11,2939,2919,5437,05330,334Jul10,9659,0219,2666,87629,453Aug10,2078,4448,8516,97625,380Sep10,1028,5429,1906,99926, 353Oct

9,7188,2178,8516,92625,350Nov9,9048,3758.8516,78325,836Dec

9,2868,1198,8516,70323,0701976 Jan9,2868,1198,8066,73723,739Feb9,2867,8558,7496,69423,587Mar9,2867,6438,5126,69422,948Apr9,2867,5318,5126,69422,462May9,2867,5318,5126,69422,280Jun9,2867,5318,5126,61520,182Jul9,2867,5318,5126,43518,571Aug9,2737,6558,3036,68820,699Sep9,6137,9368,2286,85321,459Oct

10,1588,2628,7187,01322,675Nov10,2128,2628,2306,90422,796Dec

10,0088,2628,2306,90422,3401977 Jan10,7438,4018,5557, 28223,982Feb11,2748,8168,9787,60625,167Mar11,2478,7958,9567,37025,106Apr10,9078,5288,7077,37024,346May10,9208,3588,7077,41624,377Jun10,9208,3588,7077,41624,377Jul11,0578,3588,6857,50924,681Aug11,7378,6919,2207,97126,201Sep12,2559,0749,6278,32227,356Oct12,1328,8128,8797,82527,082Nov12,4458,8128,8797,89427,781Dec

'to be continued

89(Continued)

BuySystematic Speculation

and10%7%0Month 5%3%HoldYear

13,0858,9429,3058,05329,2101978 Jan13,6179,3059,6838,38030,395Feb13,5089,2309,5098,38830,152Mar12,6638,9059,5098,38828,359Apr12,6639,20910,0569,01031,277May12,4669,0579,8908,86130,790Jun13,6119,19810,2909, 37833,617Jul14,4239,24810,84810,16035,623Aug15,1379,47911,38510,41337,386Sep16,93410,60412,73611,64941,824Oct15,0889,64110,97110,12333,739Nov15,75210,33912,13411,45939,635Dec

16,30810,70311,79811,50641,0331975 Jan17,49211,48011,99411,97244,012Feb17,32311,36911,15911,67243,587Mar17,73311,63911,42411,94944,620Apr20,40313,39113,14313,74851,337May20,65713,55813,30713,91951,976Jun21,93714,3981413214,78255,198Jul23,16914,18514,43415,15458,298Aug28,69017,56517,87317,48-r-72,188Sep24,42314,78216,40717 19E69,331Oct26,28615.06417,01717,83E74,620Nov 'A?_'1ti7

18,54920,95421, 96191,884Dec

34,49820,69124,01125,4771980 Jan 119,75734,49820,69124,01123,795Feb 114,89333,01621,27125,14026,193Mar 95,13731,76920,46725,14023,859Apr 91,18531,76920,46723,73824,447May 93,34331,76920,46723,73824,447Jun 116,23131,76920,46723,73823,134Jul 108,26731,44821,35224,97023,406Aug 112,76632,17225,77524,161Sep 121,48930,610

21,84

25,77523,406Oct 117,02130,61021,63325,77523,815Nov 114,92430.61021,63324,6401. 495Dec 109,179

/to be continued

21,633

90(Continued)

BuySystematic Speculation

and10%7%5%3%HoldYeai /Month

28,48018,82822,54423,26696,0491981 Jan28,80518,06317,48593,617 22,092Feb25,69116,87216,90598,176 21,735Mar22,81214,23414,06819,65193,708Apr22,81214,23414,06819,78795,228May26,43516,49415,40423,72285,897Jun24,29814,88213,89824,32285,076Jul24,29814,88213,68423,33792,401Aug24,66315,67814,75423,47694,529Sep23,13915,36414,75423,47689,909Oct23,13915,36413,76122,79885,593Nov23,13915,14912,91822,51982,492Dec

Source. computed by the writers from daily closing

prices from The Chinese Gold and Silver Exchange

Society

91Month-end Values (HK$) of Stock Investment

Buy

Systematic Speculationand10%7%5%3%HoldYear, /Month

10,00010,00010,00010,0009,511Jan197210,0009,85610,02910,2399,885Feb10,00010,20110,38010,59710,231Mar10,77311,20711,40411,64211,239Apr11,63012,09812, 310.12,06312,133May12,15512,64412,39812,35112,680Jun13,72914,28213,75413,95114,323Jul12,62413,47713,33913,69812,968Aug12,99014,16114,16514,24914,323Sep16,72818,23518,24118,34818,444Oct17,59019,17619,18117,20019,164Nov20,59523,49623,81421,80324,294Dec

21,53126,37727,55225, 22528,0111973 Jan36,01944,12543,13838,46246,859Feb34,53144,03644,95729,80637,493Mat31,12144,47447,29231,35521,182Apr26,32549,335 .:46,03637,-51622,017May26,32542,49045,44835,20217,954Jun30, 52355,02456,77644,19620,115Jul '51,053 28,68753,29038,46717,291Aug27,50051,08551,34636,75115,360Sep29,80157,98060,43043,89818,213Oct26,40649,16154,20940,31314,841Nov25, 9.8748,38153,34837,51112,507Dec

27,12450,49955,19238,04913,0551974 Jan25,44849,38455,19235,22211,153Feb25,44845,45352, 30934,7719,741Mar '45r453 25,44848,95433,7428,646Apr29,92558,04762,51744,01511,555May30,52262,82364,54345,44211,499Jun28.,81758,96359,40743,3859,741Jul27,96558,96359,40743,3857,493Aug25,34750,05754,16439,7806,138Sep24,26349,61452,96639, 5726,455Oct21,51745,04750,10335,9295,104Nov21,02644,01753,54737,7194.987Dec

'to be continued

92(Continued

Buy

Systematic Speculationand10%7%a5%3HoldYeaz Month

27,05052,67966,03846,2096,4161975Jan28,89555,39565,37747,9877,378Feb31,71964,37275,97255,7648,137Mar36,72174,52487,95362,3099,420Apr36,49469,11084,97362, 5029,361May36,49469,11084,70862,1269,361Jun34,67568,24984,70862,1268r953Jul34,67568,24984,70860,0898,749Aug34,67568,24983,34757,9728,924Sep34, 67567,38584,98156,68491099Oct34,67567,81785,52656,1489,157Nov37,22875,59295,53162,58510,207Dec

45,09991,574115,48775f81712,365197E Jan47,65289,384118,56278,95913,065Feb48, 50390,980120,67977,70813,299Mar43,92984,795112,74073,94312,424Apr43,92984,795109,82978,01911,724May44,79787,115105,31279,12612,045Jun43,92985,428103,27278,16811,811Jul44,79782,264102, 25278,16812,045Aug44, 36379,919101,01476,49011,928Sep41,65178,94298,'48974,21311,374Oct41,65178,942101,26673,83211,695Nov44,42885,632113,13682,48613, 065Dec

43,03982,956109,60079,90812, 6571977 Jan42,44481,809107,32777,21412,482Feb41,35479,324107,32777,21412,161Mar43,83378,613108,55579,18512,890Apr43,53578,079107,81978,64812,803May43,63478,257108,06478, 28912,832Jun41,45374,522105,11778,28912,190Jul42,44474,522I, 05, 1 1778,28912,482Aug41,35474,522105,11776,82612,161Sep41,45374,522105,11776,82612,190Oct41,55274,522106,78775, 04812,220Nov40,26374,52299,10375,04811, 782Dec

/to be continued..

93(Continued)

Buy

Systematic Speculationand10%7%5%3/Month HoIcYeaz

40,26374,52298, 85976,56011,811197E Jan40, 26374,885100,81278,07212,045Feb42,83981,412109,60084, 87813,094Mar43,88883,407112,28584,63313,415Apr45,12985,764115,45887, 02513,794May53,143100,994135,96299,53E16,244Jun55,719105/890135,400101,62417, 031Jul64,878123,297147,209116,73C19,831Aug59,535116,588140,434117,08)18,460Sep60, 070121,649149,663120, 20C19,627Oct53,555110,378127,993116,63---14, 553Nov51,083109,714122,086114, 11)14,46EDec

55r924120,111125,317119,83615,8351979 Jan52,525112,811123,009120,49815,•369Feb50,552110,752123,931123,01315,690Mar50, 552106r841122,088122,55815,690Apr52,901106,463124,973128,25316,419May50,646101,925119,646124,60815,719Jun56,847114,405129,724137,06917,644Jul54,686109,299126,936.129,41-016, 973-Aug64,458121,720143,69314970520,006Sep63,331119, 591135,105145,33019,656Oct71,599135,205152,745151,83622,223Nov82,593155,965176,198175,14925,635Dec

85,318150,419172,499181,14126,4801980 Jan85,976148,265171,359180,93626,685Feb.80,620148,265171,359177,67522,835Mar85,863162,493199,961196,96225,314Apr88,434167,360195,651199,00526,072May

105,548199,746233,512234,36931,117Jun115,44C218, 466255,3972A5, 67334,034Jul120,781228f575267,215247 ,.53735,609Aug120,089227,265256,312248, 24335,404Sep148, 281258,475296,231284,43743,716Oct146,599255,544310,064301,32542,170Nov159.005277,168321,178324,49142,987Dec

/to be continuec

94(Continued

BuySystematic Speculation

and10%7%5%3%Month HoldYear

171,302298,605336,867342,06446,3121981 Jan160,515287,134321,792339,47943,395Feb148,915282,799322,495347,29239,954Mar154,785277,273321,591359,66941,529Apr181,198324,588376,469421,04548,616May188,481337,634378,728429,15750,570Jun186,959324,199362,104428,66250,161Jul181,850324,199350,376404,89148,791Aug175,220324,199337,601389,09037,329Sep177,294314,987315,232413,29337,388Oct200,527333,137333,396453,38742,287Nov194,442308,554316,381447,29741,004Dec

Source: Computed by the writers from daily closing hang beng

Index supplied by the Hang' Seng Bank Research Department

95

BIBLIOGRAPHY

Books

Chen, Edward K.Y. and Jao,Y.C. Hong Kong Economic Affairs. Hong

Kong: MacMillan Publishing Co. Ltd., 1980.

Cohen, Jerome B, Zinbarg, Edward D and Zeikel, Arthur. Investment

Analysis and Portfolio Management. Illinois: Richard D.

Irwin, Inc., 1977.

Einzig, Paul. The Destiny of Gold. London: The MacMillan Press

Ltd., 1972.

Francis, Jack Clark. Investments: Analysis and Management. New

York: McGraw-Hill Book Company, 1976.

Hopkins, Keith. Hong Kong: The Industrial Colony. Hong Kong:

Oxford University Press, 1971.

Jao, Y.C. Banking and Currency in Hong Kong: A Stuay 01 Postwar

Financial Development. London: The MacMillan Press Ltd.,

1974.

Sharpe, William F. Portfolio Theory and Capital Markets. New YorK:

McGraw-Hill Book Company, 1970.

Tinic, Seha M. and West, Richard R. Investing in Securities: An

Efficient Market Approach. Massachusetts: Addison-Wesley

Publication Company, 1979.

Topley, M. The Role of Savings and Wealth among Hong Kong uninese,

in Jarvie, I.C. ed., Hong Kong: A Society in Transition.,

London: Routledqe and Kegan Paul., 1969, pp.167-227.

Official Publications

Census and Statistics Department. Hong Kong Monthly Digest of

Statistics. Various issues. (Hong Kong: Government Printer)

Census and Statistics Department. Hong Kong Annual Digest of

Statistics: 1972 through 1980 editions. (Hong Kong: Goverruren

Census and Statistics Department. Estimates of Gross Domestic Pro-

duct, 1966-1980. (Hong Kong: Government Printer, 1.982)

Hong Kong 1973: A -Review of 1972. (Hong Kong: Government Printer

1973)

printer)

90Honq Kong 1979: A Review of 1978. (Hong Kong: Government Printer,

1979)

Hong Kong 1980: A Review of 1979. (Hcng Kong: Government Printer,

1980)

Honq Kona 1981: A Review of 1980. (Hong Kong: Government Printer,

1981)

Hong Kong 1982: A Review of 1981. (Hong Kong: Government Printer,

1982)

The 1982-83 Budget: Economic Background. (Hong Kong: Government

Printer, 1982)

Periodicals

Bowring, Philip. "Ending a Five-year Boom." Far Eastern Economic

Review, vol. 79, no. 19 (May 14, 1973), pp.51-52.

Far East Stock Exchange Ltd. Year Book. Various Issues

Hong Kong Stock Exchange Ltd. Year Book. Various Issues.

Hang Seng Bank Limited. "Hang Seng Index". Hang Seng Economic

Quarterly. (October 1979), pp. 12-19.

Smith, Keith V. "The Major Asset Mix Problem of Individual Investor"

Journal of Contemporary Business, (Winter 1974), pp, 26-36.

Wong K. A. "Rising Property Values Support Another Boom". Asian

Finance (October 15, 1980), pp.73-75.

Interview

Luk, Roger K. H. Accountant of Hang Seng Bank Research Department.

Interview, December 19, 1981.