Banks raise interest rates in bid for cash

More than a dozen local banks are offering interest rates of more than 4 percent for time deposits longer than three months, with OCBC Wing Hang raising the three-month rate from 3.5 percent on Monday to 4.15 percent yesterday, as lenders hunt for cash from customers before the half-year end.

While it may seem appealing to investors at first, it is worth noting that many of these rates are only applicable under certain circumstances such as a minimum deposit.

Among the offers, Fubon Bank (Hong Kong) provides the highest rate of 4.5 percent for a three-month deposit of at least HK$1 million for new funds.

That means investors can receive an interest of HK$11,250 when it is due. Standard Chartered Hong Kong is offering a 4.4 percent rate for both the three-month and six-month time deposits with a new fund threshold of just HK$100,000. But the promotion only applies to priority private clients with an average balance of HK$8 million or above.

And investors who opt for a lower threshold will have to accept a smaller gain in interest.

CMB Wing Lung Bank offers a 4.15 percent return for deposits for three to nine months from HK$10,000, compared to a 4.2 percent rate for HK$500,000 upward.

Deposit rates have been rising along with Hong Kong interbank offering rates, which mostly rose yesterday.

The one-month Hibor, to which the mortgage rate is linked, grew by nearly 8 basis points to the highest level since 2007 at 5.10405 percent.

But the overnight rate inched down to 5.3 percent from 5.44 percent on Monday.

Bank of East Asia (0023) expects Hibors to drop below 5 percent next month and the prime rate to rise by up to 0.25 percentage points following a possible quarter-point rate hike in the US.

It remains unclear whether the rate would be raised again after July, but it should stay at a high level for at least a while, said chief economist Ricky Choi Wing-hung.

But Andrew Wong Wai-hong, Anli Securities chairman and chief executive, believes the interest rate has peaked and it is now a good time for depositors to catch up on the last train before banks' demand for cash rebates next month.

Investors who are more defensive may choose a longer deposit term while the rates are still high, Wong said.

But they might, at the same, miss the opportunities in the bond market if the US Federal Reserve cuts the rate later and the bond prices rebound, he added.