This general view shows the HSBC headquarters (center, right) building and the Standard Chartered Bank building (center, left) in Hong Kong on Jan 31, 2020. (ANTHONY WALLACE / AFP)
Lenders are expected to follow HSBC to raise prime rates in Hong Kong by as much as 50 basis points by the end of the year, Standard Chartered’s senior economist for Greater China Kelvin Lau said at a media conference on Thursday.
Hong Kong’s dominant bank HSBC announced that it would raise its best lending rate by 12.5 basis points to 5.125 percent effective Friday, its first rate hike since September 2018
Lau made the remark after Hong Kong’s dominant bank HSBC announced that it would raise its best lending rate by 12.5 basis points to 5.125 percent effective Friday, its first rate hike since September 2018.
That’s a move in lockstep with the city’s de facto central bank Hong Kong Monetary Authority, which increased its base rate by 75 basis points to 3.5 percent earlier, following the US Federal Reserve’s interest rate hike of the same amount.
“Anticipation around a potential prime rate increase in Hong Kong has been ripe and today’s announcement marks the beginning of an upward cycle,” Luanne Lim, HSBC’s chief executive for Hong Kong, said in a statement. “We have considered multiple factors, including the macroeconomic environment, HIBOR trends as well as the impact on our economy and the community.”
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HSBC’s 0.125 percent increase in prime rate aligns with expectations, Lau said, adding that lenders in Hong Kong may take prudent approaches when catching up with the pace of the interest rate cycle.
HSBC’s 0.125 percent increase in prime rate aligns with expectations, said Standard Chartered’s senior economist for Greater China Kelvin Lau, adding that lenders in Hong Kong may take prudent approaches when catching up with the pace of the interest rate cycle
There’s a slim chance that the Federal Reserve will cut its interest rates until 2024 at the earliest as it will take a long time for the US to bring down its domestic inflation to 2 percent, said John Thang, Standard Chartered’s head of financial markets in Hong Kong and Greater Bay Area.
Regarding the property market, Lau said the rise in the prime rate will have a limited impact on mortgage payers as the market has partly priced in the potential rates hikes.
However, the property prices will fall in the coming months and it will be difficult for confidence in the housing market to rebound in the short term, Lau said.
While the rising prime rates are a negative factor for the city’s property sector and the overall economy, Lau noted it is still “minor” when compared with other roadblocks such as global recession worries and stringent COVID-related measures.
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“All these do matter a lot more than higher prime rates on the horizon,” he added.
Standard Chartered maintained its forecast for Hong Kong’s economic growth at 0.2 percent but did not rule out the possibility of a contraction.
evanliu@chinadailyhk.com