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South China Morning Post
26-06-2025
- Business
- South China Morning Post
Hong Kong's interbank interest rate is poised to rise as the HKMA buys local dollar to defend peg
The Hong Kong Monetary Authority (HKMA) has stepped into the financial market for the first time since 2023 to support the weak local currency, which may lead to an increase in interbank interest rates and add to the burden on mortgage borrowers. The city's de facto central bank sold US$1.2 billion worth of US dollars to buy Hong Kong dollars at HK$7.85 per US dollar, according to a statement on Thursday. The action came after the local currency hit the weak end of its trading band at HK$7.85. The Hong Kong currency's peg with the US dollar has been in place since 1983. In an initiative launched in 2005, the HKMA intervenes to maintain the exchange rate within the trading band of HK$7.75 to HK$7.85 per US dollar. After settlement on Friday, the intervention is expected to decrease the HKMA's aggregated balance – a measure of the Hong Kong banking sector's liquidity – to HK$164.1 billion (US$20.9 billion), down by HK$9.42 billion. Property buyers for China Vanke's Le Mont residential project in Tai Po at the project's sales office in Cheung Sha Wan on Photo: Nora Tam 'When the aggregate balance drops, there [is] less liquidity in the interbank market, which would drive up short-term [interest] rates,' said Tommy Ong, managing director of T.O. & Associates Consultancy. Hong Kong's interbank offered rate, or Hibor, is the interest rate that banks charge each other and is used to price many loans in the city.
South China Morning Post
10-04-2025
- Business
- South China Morning Post
Hong Kong dollar strengthens as mainland stock buyers drive demand amid volatile markets
Hong Kong's currency has strengthened to its strongest level in four years against the US dollar, driven by the demand from mainland China's stock buyers who are dipping into one of the world's cheapest major capital markets through the Stock Connect scheme. Advertisement The local dollar changed hands at 7.7595 for every US$1 on Thursday morning, retracing from a high of 7.7560 per US dollar on Wednesday. This was close to the top end of the local dollar's trading range against the US currency that has been in place since 2005 to augment the 1983 currency peg, which requires intervention by the Hong Kong Monetary Authority (HKMA) to bring the exchange rate back to within the band of 7.7500 to 7.8500 per US dollar. The jump in the local currency, in spite of Hong Kong being hit with US tariffs along with mainland China, was due to the inflow of overseas capital in search of bargains in the city's stock market, which is trading at an average of 10 times earnings , bankers said. That included the so-called Southbound capital from the mainland, where investors would exchange the yuan for the Hong Kong dollar to buy Hong Kong-listed Chinese companies like Alibaba Group Holding and Tencent Holdings , they said. Hong Kong's Hang Seng Index rose 1.5 per cent on April 8, 2025. Photo: Agence-France Presse. 'Continuous Southbound inflow from mainlanders in Hong Kong is a major contributor to the local dollar's strength,' said Tommy Ong, the managing director of T.O. & Associates Consultancy, who expects the currency to hover between 7.7570 to 7.7800 per US dollar before June. 'The repatriation of Hong Kong dollars after selling US stocks from Hong Kong and Chinese overseas accounts may also add to the Hong Kong dollar's strength,' he said. Advertisement
South China Morning Post
19-03-2025
- Business
- South China Morning Post
Hong Kong keeps rate at 4.75% as Fed holds fire on Trump tariff fallout
Advertisement The Hong Kong Monetary Authority (HKMA) maintained its base rate at 4.75 per cent on Thursday. Hours earlier, the Fed left its target rate in the 4.25 to 4.5 per cent range, following the second Federal Open Market Committee (FOMC) meeting of the year. The HKMA last cut the city's base rate to 4.75 per cent from 5 per cent in December, the lowest level since December 2022. The Fed's decision was widely expected, with rates traders fully pricing in the outcome, according to data compiled by the CME Group, based on Fed fund futures contracts on Wednesday. US Federal Reserve Chairman Jerome Powell testified before a House Financial Services Committee hearing on 'The Semiannual Monetary Policy Report to the Congress,' on Capitol Hill in Washington DC on February 12, 2025. Photo: Reuters. 'I do think with the arrival of the tariff inflation, further progress may be delayed' in reaching the Fed's 2 per cent annual inflation rate, Fed chairman Jerome Powell said after the FOMC meeting. Advertisement 'The US may only start cutting the interest rate again in the middle of this year,' said Tommy Ong, managing director of the T.O. & Associates Consultancy on Wednesday before the Fed decision. 'Consistent upwards pressure from US import tariffs makes it difficult to ease drastically.'
South China Morning Post
27-02-2025
- Business
- South China Morning Post
Hong Kong mulls new moves to spur yuan usage in stock trading, business financing
Hong Kong is taking some incremental steps to underpin its role as the biggest offshore yuan hub in the coming months, including measures to shield stock investors from exchange-rate risks when trading yuan-denominated shares in the city. Advertisement The government plans to change a law next year to give investors the option to pay stamp duties on stock trades in yuan in addition to the Hong Kong dollar, Financial Secretary Paul Chan Mo-po said in his budget address on Wednesday. Plans are also afoot to add Hong Kong-listed yuan-based shares to the Stock Connect scheme, he added, without specifying the launch date. Both measures would sidestep currency-exchange risks, which would especially benefit mainland-based investors, analysts said. 'It is very logical for investors to want to settle everything in the same currency,' said Tommy Ong, managing director of T.O. & Associates Consultancy. 'The appetite among mainland investors in these stocks is huge' and is likely to spur their trading volume, he added. Financial Secretary Paul Chan Mo-po briefs the local media after delivering his budget on February 26. Photo: Elson Li In June 2023, Hong Kong allowed 24 of the biggest companies on its stock exchange – including the Post owner Alibaba Group Holding, AIA Group, Tencent Holdings – to issue yuan-denominated shares on top of the local dollar. Adding them to the Stock Connect would widen access to mainland investors and boost trading turnover, analysts said. Advertisement
