|Bid||572.90 x 0|
|Ask||573.20 x 0|
|Day's Range||565.90 - 573.80|
|52 Week Range||0.78 - 687.70|
|Beta (3Y Monthly)||0.57|
|PE Ratio (TTM)||8.91|
|Earnings Date||Oct 28, 2019|
|Forward Dividend & Yield||0.31 (5.43%)|
|1y Target Est||9.20|
Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of HSBC Holdings plc and other ratings that are associated with the same analytical unit. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
(Bloomberg) -- Hangzhou Hikvision Digital Technology Co. Ltd.’s shares fell by the most in more than a month after China’s securities regulator opened a probe into alleged misconduct by its billionaire vice chairman.The investigation, announced in a filing Wednesday, deals another blow to the surveillance giant that’s blacklisted by Washington. The Chinese seller of video cameras said the China Securities Regulatory Commission is probing two of its board members -- Gong Hongjia and Hu Yangzhong -- adding that the pair are cooperating with authorities.Hikvision is fighting for its survival after the U.S. banned the company in October, accusing it of helping Beijing crack down on Muslim minorities in the far-western region of Xinjiang. The sanction cut Hikvision off from American chipsets needed for its surveillance cameras. The company denies any wrongdoing. Hikvision’s shares fell as much as 4.5% on Thursday morning, the biggest decline since Oct. 10.Vice-chairman Gong’s fortune peaked in November 2017 at $13 billion but escalating trade tensions between Washington and Beijing have since taken a toll. It’s now worth $6.9 billion as of Wednesday’s market close in China, excluding about 41% of his stake in Hikvision that’s been pledged as collateral, according to the Bloomberg Billionaires Index. That’s still up 21.6% since the beginning of this year, mainly tracking the movement of Hikvision shares.Gong was born in eastern China’s Zhejiang province in 1965 and holds a computer science degree from Huazhong University of Science and Technology. He later moved to Hong Kong, where he founded his first company, electronics maker Tecsun Radio, according to a report by HSBC on Chinese tycoons. He earned the moniker “China’s best angel investor,” creating or investing in more than a dozen companies, the report said. He took up his current position at Hikvision in 2008 and holds a 13.4% stake, making him the company’s largest individual shareholder.Hu is president of Hikvision and holds a stake of just under 2%.The probe centers on alleged misconduct by the men related to the disclosure of information, according to the Hikvision filing. A person familiar with the matter said the issue arose from a bonus plan for employees that hadn’t been declared. The investigation is into the executives rather than the company, the person said, asking not to be identified discussing an ongoing case.A Hikvision representative declined to comment beyond the statement when contacted by Bloomberg News.Hikvision warned last month it may lose customers in overseas markets because of the U.S. blacklisting, underscoring the extent to which curbs on the sale of American technology may hurt the world’s largest video surveillance business. The company said it had anticipated the action and stockpiled enough key parts to keep operations going for some time. It has also said it didn’t foresee major impact on its business as a result of the ban.(Updates with details of share movement.)\--With assistance from Venus Feng.To contact Bloomberg News staff for this story: Gao Yuan in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Even as Hong Kong has reduced down-payment requirements to help young professionals and families to buy homes, banks are beefing up mortgage application standards to ensure that a recession does not saddle them with bad loans, bankers and mortgage brokers said. Last month, Hong Kong Chief Executive Carrie Lam, struggling to restore confidence in her administration after five months of civil unrest, approved rules allowing first-time homebuyers to borrow as much as 90% of a HK$8 million ($1 million) home's cost. Historically, mortgage delinquency is rare in Hong Kong, with a rate of about 0.02%.
(Bloomberg) -- Chinese electric-car maker Xpeng Motors Technology Ltd. has raised $400 million from investors including technology company Xiaomi Corp., as it seeks a spot among China’s more serious contenders in the market.Private-equity firms and individual investors including founder He Xiaopeng also took part in the funding round, the company said Wednesday in a statement.The startup said in June it has produced 10,000 units of its G3 sport utility vehicle, putting it in competition with local rivals such as NIO Inc. and global competitors including Tesla Inc. in the world’s biggest EV market.Yet demand in China is sputtering, with EV sales falling for months since the government cut subsidies earlier this year. The slump has raised speculation among investors that only a small fraction of China’s aspiring electric-car makers will survive.Xpeng is working with Xiaomi in developing technologies connecting smartphones with vehicles. Xpeng’s backers also include ecommerce giant Alibaba Group Holding Ltd.The carmaker said it also secured “several billions” of yuan in unsecured credit lines from China Merchants Bank Co., China Citic Bank Corp. and HSBC Holdings Plc.To contact the reporters on this story: Ville Heiskanen in Singapore at firstname.lastname@example.org;Chunying Zhang in Shanghai at email@example.comTo contact the editors responsible for this story: Young-Sam Cho at firstname.lastname@example.org, Ville Heiskanen, Will DaviesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Germany through the worst of its downturn, peace in the trade war and green shoots for the global economy next year.It’s what investors have long dreamed of. Now, they’re starting to believe it.Confidence in Germany’s economy has risen to a six-month high, while a Bank of America survey showed a record surge in optimism about the global outlook. Stocks have rallied and the U.S. 10-year yield is back up near 2%, after recession fears drove it well below that level this summer.Part of the uptick may reflect hopes that the U.S. and China are closer to a trade accord, while economic surveys are offering signs that the manufacturing-led slowdown has troughed. More recently, there’s been news that the Trump administration may delay a decision to slap tariffs on European cars -- a welcome development for Germany’s auto industry.The improvement in the ZEW -- which dropped to a near eight-year low over the summer -- comes just two days before data are expected to show Germany sank into a technical recession in the third quarter. But that’s effectively old news, and the improvement in forward-facing indicators means many are looking past it.Growth in Europe’s largest economy will probably resume this quarter, though remain at a very sluggish pace well into 2020.But the sense of hope is helping global equities, with the S&P 500 and Germany’s DAX among indexes near record highs. Benchmark Treasury yields have risen 25 basis points this month, setting them toward a break above 2%. Capturing the mood, the Bank of America survey also said investors sold more defensive stocks, such as utilities and staples, while turning to assets sensitive to the economic cycle, like value shares, financials and equities in the euro area.“Of course, it is early days. The hard data is still bad,” said Florian Hense, an economist at Berenberg. “But if genuine economic data start to confirm the message from markets and financial analysts, we can usually be reasonably confident that better times are ahead again.”The outlook is murky in parts. Not least because of the U.K. election next month and the ongoing, though reduced, risk of a no-deal Brexit. U.S. President Donald Trump, who speaks in New York later, could also derail the optimism if he pushes back on hopes about the chance of a U.S.-China trade deal.Any near-term relief on auto tariffs don’t necessarily mean a change the broad trend of trade tensions that will continue to weigh on global growth, according to HSBC global chief economist Janet Henry. HSBC sees the U.S. expansion slowing to 1.7% in 2020, below the 1.8% Bloomberg consensus.“We are operating in a different world of ongoing de-globalization trends,” she said on Bloomberg TV on Tuesday. “The bigger picture is going to be with us in the coming years.”To contact the reporter on this story: Fergal O'Brien in Zurich at email@example.comTo contact the editors responsible for this story: Craig Stirling at firstname.lastname@example.org, Michael Hunter, Sid VermaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- HSBC Holdings Plc is intensifying efforts to mend ties with Qatar after diverting its attention from the gas-rich Gulf state that’s been isolated by a regional standoff to chase a fee windfall in Saudi Arabia.Acting Chief Executive Officer Noel Quinn traveled to the country this month to meet officials at the sovereign wealth fund, finance ministry and central bank, according to people with knowledge of the matter, who asked not to be identified because the matter is private.The bank is trying to improve relations with key executives such as Finance Minister Ali Shareef Al Emadi, who sits on the boards of the country’s biggest bank, national airline and Qatar Investment Authority, one of the people said. Representatives for HSBC and the QIA declined to comment. Qatar’s media office declined to comment on behalf of the ministry of finance and central bank.HSBC is among global banks seeking to improve relations with Qatar two and a half years after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut ties with Doha. They accuse Qatar of financing terrorism and cozying up to Iran -- allegations it denies. The stakes of doing business with the country are high as the QIA pushes into technology investments and expands its global portfolio of trophy assets -- most recently with the acquisition of the St. Regis New York.Balancing ActInternational banks operating in the Gulf have been playing a delicate balancing act since the standoff started: chasing deals in the U.A.E. and Saudi Arabia -- where the world’s biggest initial public offering is underway -- and quietly doing Qatari business from London or New York instead of Dubai. The two countries were informally warning bankers that close ties with Doha could have consequences, while central banks demanded that lenders reveal their exposure to Qatari clients, Bloomberg News has reported.Still, there are signs that regional political relations are thawing. Qatar has taken some steps toward resolving its tensions with its neighbors but must still do more, a senior Saudi official said in Washington earlier this month.After a drought of public transactions in Qatar, HSBC is starting to get back into public dealmaking in the country. In April, the bank was part of QIA’s Project Maple II BV unit’s 625 million-pound ($801 million) refinancing of 8 Canada Square in London’s Canary Wharf area. It worked on 15 bond sales in the country in the two years before the standoff started, according to data compiled by Bloomberg.Saudi DealsIn Saudi Arabia, HSBC is one of the most active international investment banks through its local unit HSBC Saudi Arabia Ltd., in which the London-based lender owns a 49% stake. Quinn was among finance elites that attended Saudi Arabia’s marquee investment summit at the end of October.Samir Assaf, CEO of global banking and markets, was among the few top banking executives to show up at the 2018 event that was overshadowed by the murder of government critic Jamal Khashoggi. HSBC’s commitment to the kingdom was rewarded when the bank was appointed on Saudi Aramco’s mammoth share sale.\--With assistance from Zainab Fattah.To contact the reporters on this story: Archana Narayanan in Dubai at email@example.com;Matthew Martin in Dubai at firstname.lastname@example.org;Harry Wilson in London at email@example.comTo contact the editors responsible for this story: Stefania Bianchi at firstname.lastname@example.org, Marion DakersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- China’s most ubiquitous company is hiding one of its most valuable assets. That needs to change.Tencent Holdings Ltd., best known for the WeChat messenger that almost everyone in the country uses, has a growing fintech business. But it’s getting overshadowed by the games and social media divisions. By spinning it off into a new company, with a move to a separate listing, management could unlock as much as $230 billion in value. That would make the entity China’s fourth-largest listed company and the world’s sixth-biggest financial services firm.Such a move could help Tencent retake some of the limelight that it’s about to share with Alibaba Group Holding Ltd. once that company lists in Hong Kong. Alibaba’s fintech unit, Ant Financial Services Group, already functions as a separate business with the e-commerce giant holding a 33% stake. At Tencent, fintech and business services accounted for 26% of revenue last quarter. The Shenzhen-based company is due to report third-quarter earnings late Wednesday.I estimate that revenue from Tencent’s fintech business grew in excess of 70% last year.(1) The vast majority of that was payments. Yet Tencent also offers other products such as wealth management and has a 30% stake in WeBank, China’s first online-only bank, which was founded five years ago. Data on its fintech profits are hard to ascertain, yet information disclosed by Alibaba shows that Ant Financial was unprofitable last year, so Tencent could be in a similar boat. That’s not necessarily a bad thing. The two rivals are startups in the classic sense, using fast revenue growth driven by marketing and incentives to gain ground fast. A major reason why both have lost money in recent years is due to low take rates, the commissions received from processing payments, because they’ve offered discounts to consumers and merchants. A turnaround could be near, Sanford C Bernstein senior analyst David Dai wrote in a recent series on China’s fintech sector. He estimates that a maturing market will ease cut-throat competition and allow both companies to take a greater share of the money that sloshes through their payments platforms.As a result, Tencent’s payment business (TenPay) alone could be worth $137 billion, compared to $127 billion for Ant’s AliPay, the Bernstein team figures. HSBC Holdings Plc uses two methodologies(2) to come up with an estimated value of around $128 billion. Throw in the other products, and Bernstein calculates a base-case valuation for Tencent’s fintech unit of $160 billion, going as high as $230 billion. This indicates that 40% to 58% of Tencent’s current market cap is locked up in this hitherto hidden division. Bernstein has a base case of $210 billion for Ant, reaching as high as $320 billion.Payments spinoffs have proven to be lucrative in the past. EBay Inc. proved it with PayPal Holdings Inc. in 2015, with the latter posting a 177% normalized return since then, outpacing the 145% rise in the S&P Data Processing sub-index which includes Visa Inc. and Mastercard Inc. PayPal also trounced both eBay (35%) and the S&P 500 (49%). Square Inc., another payments provider, has been one of the hottest stocks of the past decade, returning more than 590% since its initial public offering in 2015.A more recent example comes from India, where Walmart Inc. is reported to be spinning off payments business PhonePe from local e-commerce company Flipkart Group, which it acquired last year. That transaction could turn a $20.8 billion startup into two unicorns with a combined value of more than $30 billion. Tencent doesn’t need to rush to list this fintech unit. Appetite for mega IPOs is likely to be satiated by Alibaba’s Hong Kong listing and that of Saudi Aramco over the next few months. And there’s a long runway of big startups ready for their moment in the sun. By merely making it a separate entity, management can signal intent and allow investors to start re-rating Tencent’s stock accordingly.An offering may not even be necessary, since Tencent is already sitting on more cash than it needs. Instead, the company could distribute shares in Tencent Fintech to existing shareholders, and then directly list the stock. That’s similar to the approach advocated by activist investor Dan Loeb for a Sony Corp. split.Tencent is sitting on a bright light in this fintech unit. Time to let it shine.(Updates to include reference to third-quarter earnings schedule in third paragraph.)(1) The "others" category includes fintech, cloud, film & TV. Tencent noted that fintech is the major component and gave a figure for cloudbut not content.(2) HSBC Approach 1: valuation per user. Approach 2: Using Tencent operating margins applied to its payments business, then comparing to peers.To contact the author of this story: Tim Culpan at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Hong Kong commuters faced transport chaos on Tuesday, with multiple metro train stations and lines closed and gridlock on some roads, as the city braced for a second consecutive day of clashes. Police confirmed that live fire was used and that one man had been shot during a confrontation with protesters, an incident that was filmed and circulated on social media. A separate video also went viral showing what appeared to be protesters dousing a man in liquid and setting him on fire.
of how the European Central Bank sets monetary policy, with senior colleagues using the start of her presidency to argue for changes, including formal votes on setting interest rates. Officials at four of the national central banks represented on the ECB’s governing council, its top policymaking body, told the Financial Times that they would make proposals at a meeting on Wednesday ranging from regular votes on monetary policy to requesting that the president did not announce policy plans early. Votes on interest rates — the highest-profile decisions taken by the ECB — are held only on the initiative of the bank’s president.
British banking heavyweights HSBC and RBS are launching new digital banking platforms, as competition for digitally savvy customers steps up in the face of a wave of online startups. HSBC rolled out a new app-based business banking service - previously known internally as 'Project Iceberg' and now named 'HSBC Kinetic' - in beta testing mode on Monday, while RBS is putting the finishing touches to its new digital bank Bo ahead of a public roll-out later this month. HSBC Kinetic will offer small businesses mobile-managed current accounts, overdrafts and spending and cashflow insights generated by the app crunching data on a company's spending habits.
Investing.com -- The escalation of violence in Hong Kong over the weekend has cast a pall over European stock markets on Monday, reinforcing a “risk-off” move that was already underway thanks to comments from the U.S. playing down the chances of a mutual reduction in import tariffs with China.
Asia’s emergence as a centre for business education echoes the rise of China, Singapore and India as global economic powers. Asian business schools might be younger than their American and European counterparts, but they are establishing themselves quickly and the market is proving resilient compared with other regions. Growth in applications to study on MBA programmes at Asian business schools outpaced the rest of the world for the second consecutive year in 2019, according to research by the entrance exam administrator, the Graduate Management Admission Council (GMAC).
The ongoing pro-democracy protests in Hong Kong have ravaged the region and are threatening the safety and livelihood of residents — and businesses.
HSBC has been told by the Bank of England to tighten up compliance controls for fraud, staff conduct and other non-financial risks, a source close to the bank said on Thursday. Prudential Regulation Authority regulators had highlighted the weaknesses and HSBC executives will discuss ways to address them at a forthcoming meeting, the source told Reuters, confirming an earlier report by Bloomberg. Samir Assaf, HSBC's global banking and markets division head, told senior bankers on a conference call on Tuesday of the issue, said the source, adding the weaknesses had been identified during routine regulatory work.
(Bloomberg) -- The Bank of England has warned HSBC Holdings Plc for two years in a row that it hasn’t done enough to tackle concerns about how the bank handles risks including financial crime and staff conduct.Samir Assaf, HSBC’s top investment banker, told executives on a conference call this week that the central bank’s Prudential Regulation Authority informed the firm that it was making insufficient progress on non-financial risks, according to people familiar with the discussion who requested anonymity.Assaf said the PRA’s warning was recently reiterated this year, following a previous letter in 2018, and he considers it an emergency requiring attention, according to the people. His division, global banking and markets, will hold a summit of top executives this month to discuss the problems, they said. Communications between individual banks and the BOE are rarely made public and it’s not known whether the regulator has recommended any specific remedies to HSBC.HSBC and the Bank of England declined to comment. HSBC shares dropped as much as 0.4% in London trading after the news was reported.The Asia-focused lender is examining all aspects of its business after ousting its chief executive officer earlier this year and reviewing its approach to expansion amid U.S.-China trade tensions and slowing economies. However, conduct issues have bedeviled HSBC for the better part of this decade: in 2012, the bank paid $1.9 billion to settle a U.S. investigation into breaches of economic sanctions and helping Mexican drug cartels launder money.HSBC signed a deferred prosecution agreement in that case, which saw U.S. prosecutors say insufficient controls had made the bank the “preferred financial institution for drug cartels and money launderers.”Staff SurveyNon-financial risks are unrelated to credit quality and include problems such as financial crime, staff misconduct, compliance breaches and issues related to a bank’s culture.John Flint, who was ousted as CEO in August, had been attempting to improve the bank’s culture with a program he called the “healthiest human system.” Flint’s initiative has faded from prominence as interim CEO Noel Quinn has turned to aggressive cost cuts and reshaping the business.A confidential survey this year by the U.K.’s Banking Standards Board said that out of seven investment banks, HSBC’s ranked last when staff were asked about colleagues “acting honestly and ethically,” “flexing ethical standards to make career progression” and “turning a blind eye to inappropriate behavior,” according to documents seen by Bloomberg.Last year, one of Assaf’s closest lieutenants, global head of markets Thibaut de Roux, left the bank following allegations by a junior female employee of inappropriate conduct, people familiar with the matter said at the time.(Updates with share price in 4th paragraph.)To contact the reporters on this story: Stefania Spezzati in London at email@example.com;Harry Wilson in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, Marion DakersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- WeWork, the cash-strapped co-working company whose IPO failed, is weighing giving up office floors in at least half a dozen locations in Hong Kong, one of the world’s most expensive property markets.New York-based WeWork is considering surrendering a portion of a recently signed lease in Wan Chai, near Hong Kong’s central business district, according to people familiar with the matter. The firm leased four floors, or around 60,000 square feet, for nine years in the Hopewell Centre in August, one of the people said, asking not to be identified because the details are private.Agents are approaching clients on behalf of WeWork to replace it in five other locations across the city, another person said. Those locations are in various stages of renovation but WeWork would consider relinquishing them if it finds companies willing to take over, that person said.The decision to review the space comes as WeWork slows its expansion to stem losses and convince investors its business model is viable after a dramatic financial implosion. After pulling its initial public offering in September, the troubled group received a $9.5 billion rescue package from SoftBank Group Corp. in exchange for a raft of changes, including the ouster of co-founder Adam Neumann.No New LeasesSoftBank’s billionaire founder Masayoshi Son said Wednesday that WeWork would stop adding new office leases in the coming years. Son also said there would be no more rescues, calling WeWork an exception. He added WeWork could generate $1 billion in annual profit in four to six years.The potential retreat in Hong Kong comes after WeWork said just last week it plans to expand its footprint in the city and open four new locations this quarter. Some of those are among the spaces it is now looking to vacate.“New executive leadership is evaluating our operations and assets across all geographies, including Hong Kong,” a spokesperson for WeWork said in an email. “We are fully committed to improving the business and ensuring our long-term viability to the benefit of our landlords, members, and employees.”Hopewell Holdings Ltd., the Wan Chai building’s landlord, didn’t immediately respond to a request for comment.WeWork’s new management is also is reassessing whether to proceed with about 28 potential office deals in London, its second-largest market. The deals under review are at varying stages, from a preliminary inspection of promising properties to detailed talks.Read more: WeWork Reviews London Expansion Plans After Softbank BailoutThe co-working company started its Hong Kong business in 2016 and quickly became the most aggressive shared-office operator in the city. It’s now secured 16 locations with nine under operation, the company said Wednesday.In Singapore, WeWork also has an established presence. In July, CapitaLand Commercial Trust -- one of the city-state’s largest commercial REITs -- said it will lease out 21 Collyer Quay, a 21-story building in the financial district currently occupied by HSBC Holdings Plc.A CapitaLand Commercial Trust spokesperson said Wednesday that a binding lease agreement for a period of seven years starting from the second quarter of 2021 hadn’t changed.(Updates with Masayoshi Son, CapitaLand Commercial Trust comments.)\--With assistance from Faris Mokhtar and Pavel Alpeyev.To contact the reporters on this story: Shawna Kwan in Hong Kong at firstname.lastname@example.org;Shelly Banjo in Hong Kong at email@example.comTo contact the editors responsible for this story: Katrina Nicholas at firstname.lastname@example.org, Peter VercoeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A mandatory 24-hour delay on all first-time payments from one bank account to another would cut mounting fraud in finance, UK lawmakers said in a report on Friday. Parliament's Treasury Select Committee said fraudsters stole over 600 million pounds ($777 million) from consumers in the first half of 2019 and regulators must crack down harder on scammers. With money transfers between accounts taking just seconds, customers or their bank have little time to be aware that a fraud has taken place, the report said.
Hong Kong's three largest banks are lowering their prime rates for the first time in 11 years to support local businesses. The cuts are likely to renew pressure on their margins at an awkward time, as the city's economy shrank deeper than expected and slipped into its first technical recession in a decade.HSBC, Standard Chartered Bank and Bank of China (Hong Kong), the city's three currency issuers, will all cut their best lending rate by 12.5 basis points, taking their cues from a quarter-point cut in base lending rate by the local monetary authority.The best rate at HSBC and Bank of China will stand at 5 per cent, while the rate at Standard Chartered will drop to 5.25 per cent, according to announcements on Thursday. Savings rate on US dollar and local currency deposits will be slashed to 0.001 per cent, putting the city a whisker's width from zero interest rate.That leaves little room for any of the big banks to further ease rates without hurting their books in one of their better-performing markets, analysts said. While Hong Kong and Greater China provide the biggest source of income, growth in the region has tapered amid the onslaught of US-China trade war. China's economy grew at the slowest pace on record last quarter, while Hong Kong has slipped into a technical recession amid anti-government protests."The best lending rate has never fallen below 5 per cent, as banks have to maintain a margin spread with their savings rate," said Kenny Ng Lai-yin, an equity strategist at Everbright Sun Hung Kai. In addition, traditional lenders will face heightened competition in the coming months from eight virtual banks approved by the authorities, he said.The Hong Kong Monetary Authority (HKMA), the city's de facto central bank, lowered its benchmark rate for the third time in as many months on Thursday in lockstep with another round of policy easing by the US Federal Reserve. All three of Hong Kong's large banks kept their rates unchanged through the monetary authority's policy easing in August and September.Hong Kong eases monetary policy as economy heads into recessionAt 5 per cent, the best lending rate in Hong Kong now matches the trough during 2008 financial crisis, regarded as a key threshold for lenders to sustain their profitability in the city, according to Everbright and VC Asset Management.Trimming their best lending rates below that threshold "would be hard for [the banks] to make any profit," said VC's managing director Louis Tse Ming-kwong.Profit at HSBC slumped 24 per cent last quarter, the most since 2016, amid an erosion in net interest margins. The UK lender had US$308 billion in loans outstanding in Hong Kong last quarter, or 64 per cent of its customer lending in Asia.Greater China and North Asia contributed 40 per cent of operating income at Standard Chartered last quarter, while lending in Hong Kong "moderated" during the three months. Hong Kong's traditional lenders may need to offer higher interest rates to prevent their customers shifting deposits to virtual banks, Ng said."This could cut down their margins and make it harder for them to further cut their best rates," he said. Hong Kong home prices in four-month losing streak as protests intensifiedHSBC, which traces its root to Hong Kong and Shanghai nearly two centuries ago, said it can shoulder any impact on its profitability as part of its social responsibility to support local businesses."The rate cut level may be small, but it could still be able to lift the burden of the companies and stimulate private consumption," George Leung, an adviser to HSBC in Asia-Pacific, said in a briefing. Hong Kong's economy shrank more than expected by 3.2 per cent in the third quarter from the preceding three months, according advance estimates published by the statistics office on Thursday. Five months of street protests have dented retail sales and tourism, while declines in home prices accelerated through September, a separate report showed.Investors responded to the rate cuts with mixed reaction. HSBC's shares rose 0.4 per cent in Hong Kong, while Bank of China (Hong Kong) fell 0.4 per cent. Standard Chartered's shares fell by as much as 2.8 per cent in London trading after the rate cuts were announced.Notwithstanding that, lower borrowing costs can help homeowners save about HK$256 per month, based on a HK$4 million 30-year loan priced at prime rate minus 2.75 per cent, according to an HSBC mortgage calculation tool. That works out to HK$92,254 of interest savings over the loan tenure.For depositors, they could earn HK$1 a year on HK$100,000 placed with the bank. With a savings rate near zero, HSBC has possibly made its last reduction, Leung said. "It is close to zero and there is no way to cut it any further," he added. "We have no intention to go for a negative interest rate."This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Hong Kong's monetary authority cut its base lending rate for the third time in as many months in lockstep with the US Federal Reserve, and keeping with the trend of global central banks loosening their financial taps to avert the world economy's descent into recession.The city's base lending rate will be reduced by 25 basis points to 2 per cent effective immediately, the Hong Kong Monetary Authority (HKMA) announced on its website, matching the overnight cut of the same amount by the US Fed. That prompted HSBC, Standard Charted Bank and Bank of China (Hong Kong) - the city's three note-issuing banks, to cut their rates for the first time in 11 years to take the pressure off small businesses.Hong Kong's economy shrank 3.2 per cent in the third quarter from the same period last year, its worst quarterly contraction in a decade, putting the city in a technical recession, according to a government statement Thursday."As the largest commercial bank in Hong Kong, HSBC has the social responsibility to help Hong Kong companies to cope with the difficult time," said the bank's Asia-Pacific adviser George Leung, during a press conference. "The cut may be small, but it could still be able to lift the burden of the companies and stimulate private consumption."Hong Kong's monetary policy has mirrored the US ever since the city's currency was pegged to the US dollar in 1983 under the currency board system. The joining at the hips of Hong Kong's interest rates with America's cost of funds has led to unintended consequences for the city's economy, curtailing the HKMA's ability to use monetary policy as a tool to curb inflation, or asset prices.An estimated US$130 billion of foreign capital poured into Hong Kong's assets during the previous cycle of interest rate cuts in the aftermath of the 2008 crisis, setting off a decade-long property bull run that drove home prices to the highest among global urban centres. Unaffordable housing has been cited as one of the biggest grievances that have fuelled street protests among the youth in Hong Kong's most severe civil strife that is running into its fifth month. At least US$4 billion of capital has exited the city in current turmoil by one estimate.The Hong Kong Monetary Authority's Chief Executive Officer Eddie Yue Wai-man during a press conference on 29 January 2018. Photo: David Wong alt=The Hong Kong Monetary Authority's Chief Executive Officer Eddie Yue Wai-man during a press conference on 29 January 2018. Photo: David WongIn its decision to cut rates, the Fed dropped a previous reference to "act as appropriate" to sustain economic expansion " considered a sign for future rate cuts, Reuters reported. Instead, the Fed said it will "monitor the implications of incoming information for the economic outlook as it assesses the appropriate path" of its target interest rate, a less decisive phrase.While the Fed's decision reflects concerns about global slowdown, the continuation of the policy easing cycle remains uncertain, said HKMA's chief executive Eddie Yue Wai-man. Hong Kong's open economy is not immune to global uncertainties and will face slowdown pressure, he said. China manufacturing slumps for sixth straight month, October PMI below expectations"We have not seen any signs of massive capital outflows as the Hong Kong dollar exchange rate remains stable," Yue said at a media briefing after the policy decision. He does not believe the interest rate cuts so far will lead to an overheating in the local property market. "Banks' asset quality remain good," he said. "The bad debt ratio stays at around 0.56 per cent which is low" by international standards, he added. "Property prices have dropped by 4 to 5 per cent since May but the secondary market transactions have become active again over the past two weeks."The 3.2 per cent contraction in Hong Kong's economy, based on advance estimates from the statistics office, was deeper than the 0.6 per cent forecast by economists. It follows the 0.4 per cent slump in the second quarter. The two consecutive periods of negative growth officially puts Hong Kong in its first recession since the 2008 Global Financial Crisis.To arrest the slide, the HKMA has cut interest rates by a total of 75 basis points since August, reducing the cost of money for a city economy squeezed between the US-China trade war and five months of anti-government protests.HSBC will cut its best lending rate to 5 per cent, from 5.125 per cent, effective November 1, the first time it's reducing the cost of money since 2008. The bank's savings rate for US dollar deposits would be cut to 0.001 per cent, from 0.10 per cent."The savings rate is close to zero," Leung said. "Even if the US Fed continues to cut interest rates, there is no room for HSBC to cut rate any further."Standard Chartered said it would cut its best lending rate by 12.5 basis points to 5.25 per cent, while the deposit rate on Hong Kong dollar savings would be cut to 0.001 per cent per annum, effective November 1.Visitor arrivals to the city have plummeted, causing retail sales to plunge and driving up vacancy rates at hotels, restaurants and stores across the city. More than 200 restaurants have shut, and one in 10 stores in Causeway Bay, until six months ago still the world's most expensive retail strip, now stand empty."Many SMEs, particularly those in the restaurant, retail and tourism industry, are hard hit," HKMA's Yue said. "The HKMA has urged the banks to adopt policies to help SMEs with their lending."Nine of Hong Kong's biggest lenders pledged their support two weeks ago to the HKMA's push to help 330,000 small and medium enterprises (SMEs), defined as businesses each with fewer than 50 employees, to survive the city's economic slump.This includes maintaining their credit queues, and make good use of HK$300 billion released into the financial system on October 14 as the de facto central bank reduced the countercyclical capital buffer (CCyB) ratio by 50 basis points to 2 per cent, the first reduction since 2015.The latest rate cut will also cut the cost for investors who need to borrow money to subscribe to initial public offerings (IPOs), as a string of deals follow two recent mega stock offerings. The Hang Seng Index has risen over the past two months, bringing this year's gain to 3.3 per cent.China Feihe, whose baby milk formula is endorsed by actress Zhang Ziyi, this week kicked off an IPO to raise up to HK$8.93 billion (US$1.14 billion). If it can be priced at the top end, it will be the third-largest IPO this year only after Budweiser Brewing Company APAC's US$5.8 billion sale in September and ESR Cayman's US$1.6 billion sale.The HKMA's base rate cut would lead to a modest reduction in mortgage rates for borrowers whose loans are priced according to the city's interbank offer rates, or Hibor. Commercial banks, however, may not cut their prime rates, which now stand between 5.125 per cent and 5.375 per cent, said DBS Banks' managing director Tommy Ong, speaking before the rate cuts.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. 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