Rising Hibor rates under Hong Kong's dollar-peg system leave a mixed feeling for debtors
The Hong Kong Monetary Authority (HKMA) has been actively intervening in the city's real estate market, aiming to curb excessive liquidity and stabilise the property market. These interventions, which began in May, have been coordinated with China’s central authorities like the People's Bank of China (PBOC) and the Ministry of Housing and Urban-Rural Development for broader regional measures.
The HKMA, as the key regulatory institution managing monetary policy and interest rates impacting the property market in Hong Kong, has implemented a series of 12 interventions. These actions have resulted in a significant decrease in the amount of liquidity in the banking sector. The aggregate balance, a measure of banking-sector liquidity, has been reduced by 69% to HK$53.72 billion as of August 14. The aggregate balance peaked at HK$174 billion in May.
One of the key outcomes of these interventions is the increase in the Hong Kong interbank offered rate (Hibor). The higher Hibor rate will have a negative impact on the investment market and property trading, according to independent analyst Jasper Lo. This increase will put more pressure on borrowers whose loans are based on the rate.
The HKMA's interventions are not a new phenomenon. In 2005, the HKMA established a narrow trading band for the Hong Kong dollar, allowing it to fluctuate between HK$7.75 and HK$7.85. When the local currency's exchange rate nears either end of the trading band, the HKMA buys or sells currency to alter the supply-demand equation and reel it back in. Since 1983, the Hong Kong dollar has been pegged to the US dollar at a fixed exchange rate of HK$7.80 per US dollar.
As the HKMA continues its efforts to stabilise the property market, it's important to note that the specific government official responsible for the 12 newer interventions in Hong Kong itself is not explicitly named in the search results. However, the HKMA remains the key player in managing monetary policy and interest rates in Hong Kong, thereby influencing the property market.
In conclusion, the HKMA's interventions have significantly decreased the amount of liquidity in the banking sector, leading to a reduction in the aggregate balance and an increase in the Hibor rate. These changes are expected to have a negative impact on the investment market and property trading.
