The worldwide market is closely observing the US Federal Reserve‘s interest rate meeting this week, with expectations high for an interest rate increase. These expectations are discussed by Lin Yansheng, Director of Commercial Banking at Hang Seng Bank, Hong Kong’s largest local bank. However, he assumes that interest rates will increase, but only temporarily.
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However, due to mounting worries, the bank recognizes the necessity for cryptocurrency. The bank has laid out the groundwork for virtual asset entrepreneurs to follow. According to the bank’s release, these companies can open normal banking accounts once they get an Approval-in-Principle (AIP) license from the Securities and Exchange Commission.
As opposed to the mainland and adjacent regions, Hong Kong currently has high-interest rates, which, according to Yansheng, has slowed down demand for bank loans. He anticipates this year’s loan growth to be limited. However, he offers some optimism by saying that it won’t be long until it is diminished. According to him, lending growth will be boosted by the anticipated interest rate reductions in 2024.
Statistics of the Hong Kong Monetary Authority
In accordance with the most recent Hong Kong Monetary Authority statistics, annualized loan growth has been negative since May, standing at -1.1%. According to Yansheng, as borrowing rates in the mainland fall, loan growth in Hong Kong’s banking industry will slow. The high Hong Kong dollar interbank offered rate (HIBOR) is presently reducing the volume of commercial borrowing.
Yansheng predicts that despite the high-interest rate environment, the Fed will only increase rates once more and keep them there for a while. Given that US inflation slowed to 3% in June, his estimates for next year anticipate a reduction in interest rates. Regarding trade financing, Yansheng points out that because of pressure on the mainland’s manufacturing sector brought on by high loan rates, some businesses have even shifted to Southeast Asia.
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