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The HKMA entered the market nearly 20 billion in two days, Li Ruofan expects the interbank rate to rise by 4%, and the bank will resume raising interest rates next month

2023-02-15T09:05:14.334Z


The Hong Kong Monetary Authority entered the market again after more than three months to defend the exchange rate of the Hong Kong dollar. It even undertook more than 14.8 billion Hong Kong dollar sell orders during the New York session on Tuesday, the largest single-day scale in more than half a year. Economists pointed out that the HKMA started to accept


The Hong Kong Monetary Authority entered the market again after more than three months to defend the exchange rate of the Hong Kong dollar. It even undertook more than 14.8 billion Hong Kong dollar sell orders during the New York session on Tuesday, the largest single-day scale in more than half a year.

Economists pointed out that after the HKMA began to receive money and the balance of the banking system fell, it is believed that the Hong Kong interbank rate will bottom out and rise. It is estimated that the one-month interbank rate may rebound sharply from the current level of about 2.2%, and even return to 4%.

Funding costs are expected to rise, triggering Hong Kong banks to resume raising interest rates in line with the US next month.


The Hong Kong exchange rate fell to the weak-side exchange rate of 7.85, and the Monetary Authority took a series of actions. During the New York session on Monday and Tuesday, a total of 19 billion yuan was "received".

The balance of the banking system will fall to around 77 billion yuan on Thursday, a near three-year low.

Analysts believe that the cost of capital in Hong Kong will continue to rise.

The Hong Kong Monetary Authority took a series of actions, and during the New York time on Monday and Tuesday, a total of 19 billion yuan was "received".

The balance of the banking system will fall to around 77 billion yuan on Thursday, a near three-year low.

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Hibor's decline is expected to come to an end

The Hong Kong dollar interbank offered rate (Hibor) is an indicator to measure the cost of capital. The Hong Kong dollar interbank offered rate fell significantly last month, mainly because the market expected the customs clearance of China and Hong Kong to drive the flow of people and economic recovery, and funds were parked in the Hong Kong dollar and Hong Kong stock markets. 4.3%, as low as 2.77% by the end of January, and as low as 2.1% in recent days.

In other words, the cumulative decline in capital costs exceeded 2%.

However, some analysts predict that the decline in Hibor will come to an end.

Li Ruofan, Global Market Strategist of DBS Hong Kong Treasury Markets Department, pointed out in an interview that after the HKMA takes over the money, the HIBOR has a chance to stop falling and rebound.

One of the reasons is that the HKMA's entry into the market has caused the balance of the banking system to fall.

Secondly, entering this month, the sentiment in the Hong Kong stock market began to reverse, and the Hang Seng Index gradually retreated. From the perspective of capital flow, we also saw capital outflow from the Hong Kong stock market.

Therefore, it is estimated that one-month and three-month Hibor will climb up and return to above 4%.

Li Ruofan, Global Market Strategist of DBS Hong Kong Treasury Markets Department, estimates that one-month and three-month Hibor will gradually rise and return to above 4%.

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Investment bank Goldman Sachs also holds a similar view. The research report pointed out that with the gradual reduction of the aggregate balance of the Hong Kong banking system and the new round of money-taking actions by the Hong Kong Monetary Authority, Hibor will rebound, and the valuation of banking stocks will also rise.

Chen Weijian, executive director and head of wealth management of Dah Sing Bank, believes that Hibor has begun to fall since the end of last year, and believes that it has reflected the market's expectations for US interest rate hikes.

Furthermore, banks did not follow the US interest rate hike at the beginning of this year, reflecting the abundant capital flow in the banking system, and it is believed that the chance of Hibor rebounding sharply is not high.

Chen Weijian, executive director and head of wealth management of Dah Sing Bank, believes that the bank did not follow the US interest rate hike earlier this year, which reflects the abundant capital flow of the banking system, and believes that the chance of Hibor rebounding sharply is not high.

(File photo/photo by Huang Yongjun)

The balance of the banking system is expected to gradually exceed 70 billion

In terms of the balance of the banking system, Li Ruofan pointed out that with the intervention of the HKMA, the balance of the banking system will continue to decline, and it is expected to gradually fall below 70 billion yuan from the current approximately 77 billion yuan.

However, "I believe it will not fall too fast."

As the market has different outlooks on US interest rate hikes, especially as to whether interest rates will be cut this year, the market has no consensus. It is believed that the current round of Hong Kong dollar capital flow is moderate, and the balance of the banking system is not expected to return to the level of 50 billion yuan, that is, September 2018 low.

Checking the data, the Bank of Hong Kong raised the prime interest rate slightly by 0.125% in that month. However, after the US interest rate hike cycle ended, Hong Kong followed suit.

The cost of funds has risen, and the "incentive" for banks to absorb funds through fixed deposits has increased. It is believed that not only will the fixed-term interest rate not continue to fall, but it may turn around and rise.

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Hong Kong interest rate is expected to resume in March with the US interest rate hike

After the major banks in Hong Kong raised the prime interest rate (P interest rate) three times last year, they did not follow the United States to raise interest rates at the beginning of this month, and the P interest rate remained unchanged.

However, Li Ruofan believes that due to the quarter-end factors in March, it is expected that the interest rate will rise again, which will increase the cost of funds for banks. It is estimated that Hong Kong banks will have the opportunity to resume following the US interest rate hike in March.

However, once the Bank of Hong Kong raises the lending rate, it will also need to raise the deposit rate at the same time. Based on the cost-effectiveness, it is believed that the Bank of Hong Kong will not completely "close" to the US rate hike level. It is believed that the chance of raising the interest rate by 0.125% is the highest.

Term interest rates are expected to rebound

As for the term interest rate that "interest earners" care about, due to the expected rise in interbank offered rates, the "incentive" for banks to absorb funds through time deposits has increased. It is believed that not only will the term interest rate not continue to fall, but it may turn around and rise to attract customers. To maintain competitiveness, Li Ruofan estimates that the fixed-term interest rate will gradually return to above 4%.

Source: hk1

All news articles on 2023-02-15

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