HSBC ups deposit rates

Business | Samantha Wong and Reuters 2 Jan 2019

The Hongkong and Shanghai Banking Corporation is offering new higher time deposit rates for its Jade clients, with interest at 2.2 percent for three-month new funds, and 2.4 percent for six-month time deposits.

The move came after the overnight Hong Kong Interbank Offered Rate climbed to a 10-year high at 4.6 percent on Monday.

The offer, which is effective from today, requires a minimum new fund deposit of HK$10,000.

It also applies to US dollar time deposits, with 2.8 percent for three-month new funds, and 3 percent for six-month time deposit, with a minimum deposit of US$2,000 (HK$15,600).

The bank said the three and six-month HK dollar and US dollar time deposit rates for HSBC Premier, Advance and Personal Integrated Account customers remain unchanged.

The one-month HIBOR was at 2.24 percent on Monday, and three-month HIBOR at 2.33 percent, close to the highest levels in late-2008.

The HIBOR saw a similar spike in September, when Hong Kong banks hiked their benchmark rates for the first time in 12 years.

Interbank liquidity is generally tighter towards the year-end holiday season. Hong Kong is heavily influenced by US interest rate moves because its currency's peg to the American greenback.

Meanwhile, the Hong Kong Monetary Authority warned of increasing downside risks to the economy from uncertainty over the Sino-US trade dispute, urging residents to be prepared for possible market volatility after US interest rate hikes. Last month, the SAR's de facto central bank raised the base rate charged through its overnight discount window by 25 basis points, just hours after the US Federal Reserve boosted its interest rates by a quarter of a percentage point.

However, Hong Kong's three largest banks - HSBC, BOC Hong Kong (2388) and Standard Chartered - left their prime lending rates unchanged.

"From a monetary policy perspective, banks should probably hike with the Fed. If you hike this year when the Fed is not hiking, the shock to the market could be greater," said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong.

"But in Hong Kong, commercial banks are in charge of prime rates, it's a commercial decision."

HKMA chief executive Norman Chan Tak-lam said rising interest rates reflected a normalization from a low rate environment.

Should there be no deal at the end of the Sino-US talks, "there will be continuation of outflows, property prices will come off, and Hong Kong dollar assets will be less attractive, pressuring the local currency," said Linan Liu, an Asia rates strategist at Deutsche Bank in Hong Kong.

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