3-month HIBOR hits 0.4%

It is expected to remain low.

According to UBS, 3M HIBOR (Hong Kong Inter-bank Offered Rate) hovered at around 0.4% last month.

The HKD exchange rate generally stayed near the strong side Convertibility Undertaking at 7.75.

Here’s more from UBS:

Hong Kong’s currency is linked to the USD and thus short-term interest rates are mainly determined by US Fed policy, expected return on investing in Hong Kong assets, and exchange rate expectations.

Shifts in expectations often do cause HIBOR to deviate from Libor, but as a general rule the relationship is very strong.

Interest rates are particularly important for Hong Kong given the importance of real estate and the fact that Hong Kong is a major financial centre.

The HIBOR should remain very low for quite some time. This means that real interest rates should remain substantially negative for quite some time.

But retail rates (such as mortgage rates) could edge up if the cost of funds rise. This could happen, independent of the US rate cycle, if funds flow out of the HKD.