Date
18 January 2019
Hong Kong may not be in a position to follow US rate hikes next year, given the huge liquidity in the local banking system, some observers say. Photo: Reuters
Hong Kong may not be in a position to follow US rate hikes next year, given the huge liquidity in the local banking system, some observers say. Photo: Reuters

Interest rates and property market in HK: The outlook

In an economic forum organized jointly by the Hong Kong Economic Journal and Metro Radio, the messages that emanated from keynote speakers, who included HSBC Asia Pacific advisor George Leung, Hong Kong Chief Executive Carrie Lam and HKEx CEO Charles Li, were quite noteworthy.

Their comments may shed some light on the outlook of the property market and the equity market.

Starting with HSBC’s George Leung, he believes the US will hike interest rates only once next year, but Hong Kong may not be in a position to follow, as the local banking system is still flush with liquidity.

Under the currency peg system, Hong Kong dollar does not have an official interest rate. The prime rate set by local commercial banks is closely watched by the market, among which that of HSBC is considered as the market benchmark.

If Leung is right, that is good news for the property market. Nonetheless, interest rate is only one of the key factors; government stance is also crucial.

Commenting on the recent housing market correction, CE Lam called it “very positive”.

Government data shows Hong Kong’s home prices eased 3.7 percent on average since August. “That has not even offset the increase since the beginning of this year, let alone the rally since I took office on July 1 last year,” Lam noted.

She said bluntly that expectations that the government would seek to shore up the property market to stem the recent price fall are unrealistic.

As such, any policy softening seems to be out of the question at the moment.

Meanwhile, HKEx’s Li said the bourse will embrace new economy and launch a full-scale reform.

The stock exchange will announce its strategic plan next year, Li said.

He revealed that northbound trading of the stock link scheme will introduce blockchain technology. HKEx will also explore the possibility to become the world’s first digital assets exchange.

Li is confident there will be a strong pipeline of IPOs of so-called new economy companies next year, which can help Hong Kong keep its crown as the top IPO market globally.

This article appeared in the Hong Kong Economic Journal on Dec 11

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal columnist

EJI Weekly Newsletter

Please click here to unsubscribe