Since the Bank of Hong Kong first raised the Prime Rate (P) rate in line with the US this year, the Hong Kong dollar interbank rate (Hibor) has continued to climb, with Hibor rising to 4.8% overnight, the highest level since 2007. In the face of the high cost of funds in Hong Kong dollars, banks have successively raised the interest rate on time deposits to attract money, and the semi-annual fixed interest rate has recently increased by 4%. The analysis believes that before the end of the half year in June this year, Hibor is expected to continue strongly, and it is estimated that the momentum of banks to raise the fixed interest rate will increase, and will focus on pushing up the short-term term interest rate.


The rise in the Hong Kong dollar interest rate has not stopped, especially the short-term interest rate, and today Hibor went down to the next city, rising to 4.8% upstairs, the highest level since 2007. As for the one-month Hibor related to the building press, it rose for 16 consecutive days, reaching a high of 4.52%.

Driven by interest rates, the Hong Kong dollar also rose to a three-month high, and the Hong Kong dollar traded at 7.8323 against the US dollar, away from the weak side exchange guarantee level of 7.85.

The rise in the Hong Kong dollar interest rate has not stopped, especially in short-term interest rates. Overnight, Hibor went down again, rising to 4.8 centimeters, the highest level since 2007. (Profile picture)

The bank reservoir fell to a tenth of its 2021 level

In fact, the rise in interest rates and remittances this time stems from last week's interest rate hike by the US Federal Reserve. At that time, the US interest rate hike caused the interest rate differential between Hong Kong and the United States to exceed one cent, and under the active carry trade, the depreciation of the Hong Kong dollar hit a weak exchange guarantee of 7.85, which required the intervention of the HKMA, which reduced the balance of the Hong Kong banking system to HK$445.27 billion, the lowest level since 2008. Compared to the level of the summary balance in September 2021, the current balance is only one-tenth of the current balance.

Hong Kong banks followed the US interest rate hike one after another, but the rate hikes of different banks were different, the first since the current interest rate hike cycle. Among them, the issuing banks HSBC and BOC raised interest rates by one-eighth (i.e. 0.125%), although some banks such as Chiyu Bank raised interest rates by a higher rate than their peers, closely following the US dollar by a quarter (i.e. 0.25%). The analysis believes that to a certain extent, it reflects that some small and medium-sized banks may face greater financial pressure, so they need to raise interest rates significantly.

Hong Kong banks have raised interest rates by different amounts, the first since this cycle. Among them, the issuing banks HSBC and BOC raised interest rates by one-eighth (i.e. 0.125%) (profile photo)

Before the end of half a year, Hibor maintained its upward trend or gained 5%.

Lee Ruofan, Global Market Strategist, Treasury Markets Department, DBS Hong Kong, pointed out that it is believed that Hibor will maintain its upward trend before the end of the half year in June, because the balance of the banking system has fallen to the low level of 6, but the market demand for funds in Hong Kong dollars has increased, including the dividend payment factor of enterprises, and many Chinese stocks will pay dividends in Hong Kong dollars in the coming months, so they will deploy early and buy Hong Kong dollars now.

Statistics show that the dividend payout of Chinese stocks in three months is nearly $700 billion

According to Bloomberg's preliminary calculations last month, mainland companies listed in Hong Kong will pay a total of US$801.680 billion in dividends this year, of which US$6 billion will be paid in the three months starting in June. Businesses need to convert Hong Kong dollars to pay dividends to local shareholders in the summer.

Lee Ruofan, Global Market Strategist at DBS Hong Kong's Treasury Markets Department, pointed out that driven by rising demand for Hong Kong dollars, it is estimated that Hibor has the opportunity to further match US interest rates in one month, and the short-term fixed deposit rate is expected to increase rapidly. (Provided by interviewee)

Hibor is currently at 4.5% in one month, and she pointed out that driven by the rising demand of the Hong Kong dollar, it is estimated that Hibor will have a chance to further catch up with the US interest rate in one month, and it is not ruled out that it will rise to the 5% level.

In the face of the rising interest rate of the Hong Kong dollar, the attitude of banks to "absorb money" has become more positive, and the interest rate of time deposits has gradually rebounded recently. Taking the interest rate of half-yearly time deposits as an example, the latest rehash is more than 4%.

In the face of the rise in the interest rate of the Hong Kong dollar, the attitude of banks to absorb money has become more positive, and the interest rate of time deposits has gradually recovered recently. Taking the interest rate of half-yearly time deposits as an example, the latest rehash is more than 4%. (Photo by Zhong Yan)

The short-term fixed deposit interest rate is expected to increase rapidly

Based on the information of multiple banks, OCBC Wing Hang Bank's interest rate is the highest for the temporary 6-month period, and the interest rate taking into account the cash rebate is as high as 4.18%, but the entry threshold is high, and the minimum deposit amount is 100 million yuan. As for CMB Wing Lung Bank, the interest rate also reached 4.05%, which is applicable to new customers through branches, with a minimum deposit of $10,<>.

Regarding the trend of banks' fixed interest rates, Li Ruofan pointed out that due to the recent continuous rise in Hibor, the opportunity for banks to absorb money through time deposits has increased, which has narrowed the gap between Hibor and time deposit interest rates. "I believe that the interest rate of some short-term time deposits, such as one-month and three-month fixed deposits, will increase more significantly."

U.S. interest rate hike|Banks increase P for the first time this year Experts expect Hong Kong interest rates to not peak Hibor or return to 4%.