HSBC: It hopes to reduce business costs when the Hong Kong economy is in trouble.
Hong Kong Wen Wei Po (By Shum KinLok)
The Fed cut interest rates by 0.25% as expected, the third time this year. While many Hong Kong major banks, who hadn’t followed to cut rates for successive two times, rarely followed the Fed’s interest rate cuts yesterday for the first time in nearly 11 years. HSBC took the lead in lowering the Prime Rate (P) by 0.125% from 5.125% to 5%, and the Hong Kong dollar savings rate was also lowered accordingly. Other major banks also announced a simultaneous interest rate cut, which will take effect from today to next Tuesday. An Asian Pacific Region Consultant of HSBC, Leong Siu-kei yesterday expressed, the interest rate cuts will help reduce business costs since Hong Kong's economy and business are facing difficulties, and it is expected that Hong Kong will have economic negative growth in 0.5% this year. He believed that the interest rate cuts this time is slight and will have little impact on the property market.
The Fed cut interest rates by 0.25% yesterday, and the Federal funds target rate fell to 1.5-1.75%. The HKMA lowered the basic interest rate of the discount window by 0.25% to 2%. Subsequently, HSBC, the local leading bank, announced that it would reduce P from 5.125% to 5%. This is the first time since November 2008 that interest rates have been cut, leading P to return to the level before the rate hike of 0.125% on September 28 last year. In addition, HSBC's Hong Kong dollar savings deposit rate of HKD5,000 or above was reduced from 0.125% to 0.001%. Standard Chartered also reduced P by 0.125% from 5.375% to 5.25%. This bank also announced that the Hong Kong dollar savings account rate would fall from 0.125% to 0.001% today. In addition, BOC and Hang Seng will also cut their P interest rates from 5.125% to 5% respectively next Monday and Tuesday.
The industry decides by itself whether it will follow the interest rate cut.
Leong Siu-kei expressed yesterday that, they decided to cut interest rates in consideration of the factors that future interest rates sluggishness, the structure of the bank's costs, and the deterioration of the business environment, hoping the decrease of borrowing cost will bring a "timely rain" to the Hong Kong economy. He said that HSBC, as a large-scale bank in Hong Kong, has certain social responsibilities for Hong Kong and expects to tide over the difficulties with its customers. As to whether the industry will follow interest rate cuts, he said that this needs to be decided by other banks.
The third-quarter GDP of Hong Kong announced by the Government yesterday fell by 2.9% year-on-year, and it has fallen for two quarters by range increasing to 3.2% in quarterly basis after the seasonal adjustment, showing Hong Kong economy has entered a technical recession, also the Government expects Hong Kong economy will likely to experience negative growth throughout the year.
The deposit rate has been at zero levels and no space for further falling.
Leong Siu-kei continued to note that although the rate cut is not large this time, HSBC's savings deposits rates are technically in zero-rate after this adjustment, in fact, no space for further falling, so it is believed the last interest rate cut this year, and there is no room for further adjustment in the future even if the Hong Kong Hibor will fall or the US will cut interest rates again, .
The HSBC Hong Kong Chief Executive Officer, Sze Wing-yan expresses, the bank's interest rate adjustment mainly takes into account the Fed's interest rate cuts again, as well as the macroeconomic environment of the local and international markets, and it is believed this will help alleviate the operating pressure of Hong Kong enterprises. They will continue to closely monitor the economic situation and the competitive environment of the market and review the interest rate of the bank in a timely manner. The Executive Director and Head of Retail Banking and Wealth Management of Hang Seng Bank, Kwan Wing-han also expressed, they decided to cut the Prime Rate after considering various factors, including the Fed's interest rate cut and Hong Kong's economic environment, hoping this will help support Hong Kong's economic development.
Leong Siu-kei also expected that the Fed will unlikely to cut interest rates again in December. However, he said that it depends on the performance of the US economy and the latest developments in the Sino-US trade war. There will be a possibility of interest rate cuts in the first half of next year.
HKMA: Interest rate trend remains uncertain.
On the other hand, the president of the HKMA, Jyu Wai-man expressed yesterday that whether the Fed will cut interest rates again depends on the assessment of the US economic situation, while Hong Kong currency market remains stable, Hong Kong dollar exchange rate is steady, and interbank lending, foreign exchange transactions, and settlements are normal. However, he also pointed out that although the Fed has cut interest rates three times, the Fed mentioned that the current interest rate is appropriate, and the future policy direction depends on the assessment of the changes in the US economic outlook, so the future interest rate trend is uncertain.
He calls on the public to carefully manage financial risks.
In addition, Jyu Wai-man also mentioned that the Hong Kong Hibor may not necessarily follow the US interest rate cut, but depends on the changes in the supply and demand of Hong Kong dollar funds. He stressed that Hong Kong's economic pressure is "not small", coupled with there are uncertainties in the trend of global interest rates, assets, and financial markets, so the public should carefully manage financial risks.
Interest rates are closely related to the property market. Although the Government has announced earlier the relaxation of the mortgage insurance limitation to help the public on the first housing, Mr Leung is not worried the interest rate cut will stimulate the property market to rise, because interest rate is only one of the many factors affecting property prices, and Government policies and public confidence in Hong Kong may have a greater impact on property prices. Jyu Wai-man expressed, local property prices have fallen by about 4-5% from high since this May, and the transaction has also shrunk, while the second-hand property market has become more active in the past two weeks. He believed that property prices in Hong Kong are affected by different factors, and interest rate is only one of the factors, besides others such as supply, economy and social atmosphere will all affect property prices.