Hong Kong banks hike lending rates for first time in 12 years

Banking giant HSBC on Thursday hiked its lending rate in Hong Kong for the first time in 12 years. (AFP)
Updated 27 September 2018
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Hong Kong banks hike lending rates for first time in 12 years

  • The Hong Kong Monetary Authority is required to lift rates in line with the Fed owing to the dollar peg
  • The HKMA has spent billions this year supporting the currency

HONG KONG: Two of Hong Kong’s biggest banks raised their lending rates on Thursday for the first time in 12 years, ending an age of cheap cash that could hit the city’s famously red-hot property market.
The moves by HSBC and Standard Chartered 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.
HSBC boosted its lending rate 12.5 basis points to 5.125 percent, before Standard Chartered lifted its rate from 5.25 percent to 5.375 percent.
“Today’s change in rates marks the start of the normalization 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.
After the HKMA raised interest rates to 2.5 percent, its chief executive Norman Chan warned the public to be “on high alert” over increases 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 $1 if local banks request it.


US, China agree tentative trade truce ahead of G20 summit: report

Updated 34 min 10 sec ago
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US, China agree tentative trade truce ahead of G20 summit: report

  • Details of the agreement, which would halt the next round of US tariffs on an additional $300 billion of Chinese goods, are being laid out
  • Chinese President Xi Jinping’s meeting with US President Donald Trump is conditional upon Washington agreeing to such a tentative agreement

The United States and China have agreed to a tentative truce in their trade dispute ahead of a meeting between leaders of the two nations at the G20 summit this weekend, the South China Morning Post reported on Thursday, citing sources.
Details of the agreement, which would halt the next round of US tariffs on an additional $300 billion of Chinese goods, are being laid out in press releases and will be out as coordinated press releases and not a joint statement, the newspaper said.
Chinese President Xi Jinping’s meeting with US President Donald Trump is conditional upon Washington agreeing to such a tentative agreement, SCMP reported, citing one source with knowledge of the plans.
Trump is set to hold much-anticipated trade talks with Xi in Osaka at 11:30 A.M. on Saturday, a White House spokesman told reporters on Wednesday.
Trump said on Wednesday a trade deal with Xi was possible this weekend but he is prepared to impose US tariffs on virtually all remaining Chinese imports if the two countries continue to disagree.
China and the United States have already imposed tariffs of up to 25 percent on hundreds of billions of dollars of each other’s goods in a trade war that has lasted nearly a year.
Relations between Washington and Beijing have spiraled downward since talks collapsed in May, when the United States accused China of reneging on pledges to reform its economy.