Super-low Hong Kong rates unlikely to return, says Natixis

Hong Kong may not see another super low-interest rate period, though the US Federal Reserve is expected to announce two more cuts, according to Natixis.

The wide spread between Hong Kong's and the US's interest rates before was mainly because the dollar-asset holders were moving to Hong Kong and other non-dollar markets, which led to the rates as low as below 1 percent during the May-August period, said Gary Ng, senior economist of Asia Pacific at Natixis Hong Kong branch.

Therefore, the city's rate may depend on the investors' confidence in dollar-settled assets in the short term, Ng noted.

As the Hong Kong Interbank Offered Rate rebounded to levels similar to the US rates, Ng thinks it may be difficult to see the city's borrowing costs fall to super low levels again, unless the funding demand from the initial public offerings and stock market is in frenzy again.

Natixis forecasts two more interest rate cuts to be announced by the Fed this year, with 25 basis points each.

For Hong Kong's mortgage-linked one-month HIBOR, Ng expected it to average at 2.15 percent next year.