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HSBC Holdings Plc lowered its Hong Kong prime lending rate for the first time in 11 years, underscoring the economic challenges facing the financial hub.
The London-based bank cut its best lending rate by 12.5 basis points to 5% in Hong Kong. The city’s government is set to release data Thursday that’s expected to show the local economy entered a technical recession in the third quarter, with retail and tourism sectors battered by almost five months of anti-government protests.
HSBC’s cut, to take effect November 1, will likely help the Hong Kong economy and companies, George Leung, the banks Asia-Pacific adviser, said at a briefing. There is not much more room for banks in the city to cut further, and the reduction will probably be the last this year, he said.
The move comes after the Hong Kong Monetary Authority cut its benchmark interest rate Thursday, in line with the city’s currency peg to the dollar following the US Federal Reserves reduction in borrowing costs. The HKMA lowered its base rate to 2.00% from 2.25%, hours after the Feds quarter-point cut, according to the institutions page on Bloomberg. As the Hong Kong dollar is linked to the greenback, the territory essentially imports U.S. monetary policy.
It is hard to say whether the Hong Kong interbank rates may follow the US rate, HKMA Chief Executive Eddie Yue had said at a briefing. However, the US rate cut does reflect the downward pressure on the global economy, to which Hong Kong is not immune.
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