Hong Kong banks offer savers better interest rates but only on yuan deposits
HSBC raises yuan deposit rate to 3.8pc after Bank of China raised it to 4pc
Banks are offering savers higher rates of return on their yuan deposits as mainland companies look to borrow offshore, increasing the demand for the Chinese currency in Hong Kong, say analysts.
On Monday, HSBC raised its interest rate to up to 3.8 per cent for 12-month fixed-term yuan deposits, compared with up to 0.2 per cent on an equivalent Hong Kong dollar deposit.
HSBC’s interest rate change follows similar moves by rivals. On January 31, Bank of China (Hong Kong) raised its rate up to 4 per cent for normal savers.
“Banks are offering savers higher rates because offshore yuan liquidity in Hong Kong, and also Singapore, has become tighter,” said Carie Li, an economist at OCBC Wing Hang Bank in Hong Kong. “Deleveraging on the mainland has meant more Chinese companies are looking to borrow in Hong Kong.”
Hong Kong banks’ total lending to mainland China stood at HK$4.07 trillion (US$601 billion) at the end of September last year, according to the latest figures provided by the Hong Kong Monetary Authority, compared with HK$3.55 trillion at the end of September 2016.
On Monday, the overnight yuan Hong Kong interbank offered rate stood at 3.42 per cent, its highest since a brief spike in November, and higher than almost all of 2017.
“The approaching Chinese New Year is also a short-term factor in tightening liquidity in the offshore market,” said Li.
