Hong Kong banks lift time-deposit rates amidst expected rate hikes

Standard Chartered and ICBC raised time-deposit rates to more than 2%.

Bloomberg reports that major lenders in Hong Kong are lifting time-deposit rates amidst a surge in short-term borrowing costs and expectations of a Fed rate hike that may squeeze profit expectations.

Standard Chartered and ICBC have lifted time-deposit rates to more than 2% in some cases, whilst China Citic Bank now pays as much as 3% to new savers who transfer funds into three-month Hong Kong dollar deposits. HSBC Holdings Plc became the latest lender to promise higher deposit rates, a bid to lock up funding in anticipation of continued loan growth.

“This trend will continue as rates are only going up,” Lawrence Kung, head of the deposits department at Wing Lung Bank Ltd. in Hong Kong, said in a phone interview. “Banks are preparing themselves in terms of funding before the rate-hike cycle.”

Also read: Hong Kong banks scrap fixed-rate mortgages as interbank lending rates surge

This comes as interbank liquidity is set to tighten even further as the Fed plans to raise rates even further and major tech firms are flocking to Hong Kong for their public debuts, sucking money out of the system. 

The situation is further aggravated as the aggregate balance of the banking system may drop to only a few billion Hong Kong dollars in the coming months as the Hong Kong Monetary Authority continues to mop up liquidity to defend the currency’s dollar peg, said Ryan Lam, head of research at Shanghai Commercial Bank.

Here’s more from Bloomberg.