Hong Kong’s major lenders including the three note-issuing banks – HSBC, Standard Chartered and Bank of China (Hong Kong) (BOCHK) – kept their key lending and deposit rates unchanged, meaning local businesses and mortgage borrowers will have a longer wait for the cost of borrowing to decline.
HSBC and its subsidiary Hang Seng Bank, along with BOCHK, kept their prime lending rates at 5.875 per cent, while paying 0.875 per cent per annum for savings deposits over HK$5,000 (US$640) and nothing to those below that, the banks said in separate statements on Thursday.
Standard Chartered and Citibank also kept their prime rate unchanged at 6.125 per cent, while DBS kept its prime rate unchanged at 6 per cent.
The lenders’ decisions came after the Hong Kong Monetary Authority (HKMA) followed the US Federal Reserve in keeping interest rates at their current levels on Thursday morning.
The HKMA kept Hong Kong’s base rate unchanged for the sixth time in a row at 5.75 per cent on Thursday morning, in lockstep with the Fed’s move hours earlier. The de facto central bank warned the public that high interest rates may “last for some time” because US inflation remains stubbornly high.
“In recent months, inflation has shown a lack of further progress toward our 2 per cent objective,” Fed Chairman Jerome Powell said at a press conference. “It is likely that gaining greater confidence will take longer than previously expected.”
The HKMA has followed the Fed’s rate decision in lockstep since 1983 by design under its linked exchange rate system to preserve the local currency’s peg to the US dollar.
The status quo stance means businesses and mortgage borrowers will have to wait until at least later this year for interest rate relief as the economy struggles to crawl out of a stubborn slump.
The number of Hongkongers with negative-equity loans – loans where the property value has slumped below the mortgage – stood at 32,073 in the first quarter. This is the most since some 40,000 cases were recorded in the first quarter of 2004, according to data released by the HKMA on Tuesday.
Hong Kong stocks rose on Thursday, driven by gains in the banking and insurance sectors amid overall upbeat sentiment following Beijing’s recent efforts to prop up stocks.
The Hang Seng Index rose 2.5 per cent to 18,207.13 on Thursday. The benchmark has risen about 20 per cent from a January low and has now entered what is defined as bull-market territory. The Hang Seng Tech Index rose 4.5 per cent, while China’s onshore stock exchanges are closed for the week.
“Asian market participants could heave a collective sigh of relief that Chair Powell signalled during the press conference that the Fed retains an eventual easing bias and with that, a low possibility of another rate hike,” said David Chao, global market strategist of Asia Pacific (ex-Japan) at Invesco.
“Asian risk assets could continue to perform well. Global growth, led by the US, appears to be re-accelerating, which is positive for the Asian economies and markets.”
The city’s lenders raised their prime rates five times from September 2022 to July 2023 by a total of 87.5 basis points to the highest since 2007.