Hong Kong raises interest rates after Fed hike, banks follow (updated)

Boc Hong Kong Holdings

04/05/2023 24:09

(Adds banks' decisions on rate, HSBC comment in paragraphs 8,9)
       HONG KONG, May 4 (Reuters) - The Hong Kong Monetary
Authority (HKMA) on Thursday raised its base rate charged
through the overnight discount window by 25 basis points to
5.50%, its highest since January 2008, hours after the U.S.
Federal Reserve delivered its latest rate hike.
    Hong Kong's monetary policy moves in lock-step with the
United States as the city's currency  HKD=D3  is pegged to the
greenback in a tight range of 7.75-7.85 per dollar.
    "Rate hikes in the U.S. will not affect the financial and
monetary stability of Hong Kong," Eddie Yue, Chief Executive of
the HKMA, told reporters.
    "The market has continued to operate in a smooth and orderly
manner and the total deposits in the banking system in Hong Kong
have also remained stable."
        The Fed raised interest rates by a quarter of a
percentage point on Wednesday and signalled it may pause further
increases, giving officials time to assess the fallout from
recent bank failures and monitor the course of inflation.
    HKMA said Hong Kong interbank rates, which have been
climbing over the past few months, will likely rise further with
the Fed latest rate hike. 
    The public should carefully assess the interest rate risk
when taking out mortgages or making other borrowing decisions,
it said.
    HSBC  0005.HK  said it would raise its best lending rate in
Hong Kong by 12.5 basis points to 5.75%. Bank of China Hong Kong
 2388.HK  and Standard Chartered  2888.HK  also lift their rates
by 12.5 basis points. 
        "Amid an uncertain global environment, rate expectations
will remain uncertain," said Luanne Lim, chief executive of Hong
Kong HSBC. "We will continue to monitor the external environment
and be prepared to adjust our rates if needed."
  
        One month Hong Kong interbank offer rate (Hibor)
 HIHKD1MD= , the benchmark referenced for residential mortgages,
rose 7.5 basis point to 3.62857%, highest since Jan. 4.
Three-month Hibor  HIHKD3MD=  rose 9.5 bps to 3.99423%, the
highest since mid-March.  
  
    Commenting on the impact of the rate hike on the city's
property market, already one of the most unaffordable in the
world, Yue said the market is not affected by interest rates
alone. 
    "After China and Hong Kong markets have returned to normalcy
post COVID-19, investment sentiment in the real estate market
has improved, consumption power has risen. The Hong Kong
property market has rebounded by 5-6% year-to-date," Yue said,
adding other economic factors also play a part. 
    Private home prices in the financial hub rebounded 5% in the
first quarter after a 15% drop in 2022.


    

 (Reporting by Donny Kwok and Georgina Lee; Editing by
Jacqueline Wong, Lincoln Feast and Kim Coghill)
 ((donny.kwok@thomsonreuters.com; +852 3462 7745; Reuters
Messaging: donny.kwok.reuters.com@reuters.net))