Overnight HIBOR exceeds US rates on ample liquidity amid robust stock market

The overnight interbank borrowing rate rose to 4.65 percent on Monday, above US interest levels, but the reversal is expected to be short-lived.

The overnight Hong Kong Interbank Offered Rate climbed for five consecutive trading days, up by 64.7 basis points from the previous session and reaching a new high for the year.

It comes as HIBOR has seen its gap with US interest rates narrow, after the Hong Kong Monetary Authority absorbed Hong Kong dollar liquidity from the market last month in response to the local currency hitting the weak end of its trading band at 7.85 per US dollar.

Ryan Lam Chun-wang, the Head of Research for Hong Kong at Shanghai Commercial Bank, attributed the reversal to the lower lending willingness of local banks after the influx of mainland investors via the Stock Connect last week and the monthly settlement of August.

But Lam projects the surge of overnight HIBOR would be temporary, as market participants come back after the United States' Labor Day Weekend.