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HONGKONG-BRITAIN-FINANCE-HSBC-RATES
HSBC hikes Hong Kong lending rate for first time in 12 years
HONG KONG, Sept 27, 2018 (BSS/AFP) – Banking giant HSBC on Thursday hiked
its lending rate in Hong Kong for the first time in 12 years, a move that
ends an age of cheap cash and could hit the city’s famous red-hot property
market.
The key rate was lifted by 12.5 basis points to 5.125 percent, HSBC said
in a statement.
The decision came after the Hong Kong Monetary Authority — the city’s de
facto central bank — lifted its borrowing costs following an increase by the
US Federal Reserve. The HKMA is required to lift rates in line with the Fed
owing to the dollar peg.
The new HSBC rate hike will come into effect Friday.
“Today’s change in rates marks the start of the normalisation cycle for
local interest rates and we believe Hong Kong is well prepared for the
change,” said Diana Cesar, HSBC’s chief executive in Hong Kong.
More of the city’s commercial banks are expected to follow HSBC’s lead and
hike their prime rates, meaning higher mortgage payments for loans that are
linked to it.
The Federal Reserve raised the benchmark interest rate on Wednesday for
the third time this year in a widely anticipated decision, citing the strong
US economy and jobs market.
The HKMA raised interest rates to 2.5 percent.
Its chief executive Norman Chan warned the public Thursday to be “on high
alert” over rates rises and to manage associated risks, adding that property
and assets would be affected.
“The current global economic conditions and financial environment are full
of uncertainties for Hong Kong,” he said.
Hong Kong’s finance secretary Paul Chan wrote in his blog earlier this
week that the city’s low interest rate environment was “coming to an end
soon”.
“According to some market figures, the property market has shown signs of
cooling over the last few weeks with both prices and volume of transactions
falling,” he wrote, adding that residents should be vigilant about the risk
of a possible downturn in the housing market.
The HKMA has spent billions this year supporting the currency as it hits
the bottom end of its permitted HK$7.75-7.85 band against the US dollar.
That has dented the huge well of cash in the city’s banking system that
previously kept the crucial Hong Kong InterBank Rate (HIBOR) subdued.
Under the Linked Exchange Rate System, the authority is required to buy
the local currency at HK$7.85 to US$1 if local banks request it.
BSS/AFP/HR/1025