【Hong Kong Dollar Fixed Deposit】Hong Kong Dollar 1-year fixed deposit with a maximum interest rate of 2.8% earns 14,000; additionally, 18 banks and small to medium-sized banks are closely following HSBC in reducing interest rates

▲ Hong Kong Dollar Fixed Deposit Rate Cut Intensifies

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The potential prolongation of the US-Iran conflict into September has led to Middle Eastern hot money seeking safe havens in Hong Kong, viewing the Hong Kong dollar as a “stable coin,” causing a nationwide decline in interest rates. It’s no surprise that this week saw as many as 19 banks competing to lower Hong Kong dollar fixed deposit rates (much more than 12 last week), the highest this year, including three banks on Friday (March 6): Fubon, ICBC International, Standard Chartered, Mox, Ant, StarStar, and PAO. Conversely, some banks unexpectedly increased rates after reductions (two banks last week).

It is expected that the rate cut wave will continue for at least half a month, with a wait until the end of the month. As the first quarter approaches its end, rate hikes may bring a turnaround, driven by three main reasons:

1. Middle Eastern funds seeking refuge: Iran crisis prompts hot money to find safe havens in Hong Kong

2. Gulf War unlikely to resolve quickly: Foreign reports suggest US military actions against Iran could last at least 100 days, possibly extending to September, rather than the 4-5 weeks Trump mentioned. Market expects a prolonged US-Iran conflict, which may delay major development projects and leave high interest rates as the only way to attract deposits.

3. Major banks leading rate cuts: HSBC was the first to cut fixed deposit rates in March, followed by other small and medium-sized banks, sparking a rate cut frenzy.

In summary, 25 Hong Kong banks adjusted fixed deposit rates this week, with 19 decreasing (including Standard Chartered, ICBC, Fubon, Bank of China Hong Kong, PAObank, HSBC, Hang Seng, SC, ICBC, E.SUN, Nanyang Commercial Bank, Shanghai Commercial Bank, CCB, OCBC Wing Hang, Public Finance, Ant, HSBC, Lee Hoi, Mox), while 6 banks both increased and decreased rates (ICBC short-term cut, long-term increase; Fubon, StarStar, Chuangxing increased then decreased; Bank of China Hong Kong and Nanyang Bank decreased then increased).

Note: *Only the highest rate after adjustment is listed for each bank. Rates are based on Hong Kong banks’ official announcements.

Small and medium banks surprise with aggressive rate cuts, offering 2.8% interest

With the US-Iran prolonged conflict, Hong Kong banks have paused rate cuts! The market continues to see rate reductions in March, but two fixed deposit tenors hit record highs: 18 and 24 months. The top interest rate rankings saw a reshuffle across five tenors: 2 months, 4 months, 1 year, 18 months, and 2 years.

The biggest surprise this week is DnA Bank, which offers 2.8% for 1-year, 18 months, and 24 months, requiring only new customers with a minimum deposit of HKD 100,000. For deposits up to HKD 500,000, the maximum interest earned in a year is HKD 14,000. Two new features:

1. Flexible withdrawal: only interest each month (about HKD 1,166 for HKD 500,000), or partial principal and interest monthly

2. Increased liquidity.

This is the second Hong Kong bank after Mox to promote flexible interest payout for fixed deposits, rather than waiting until maturity for principal and interest. However, note that continuous withdrawals reduce the principal, and accumulated interest also shrinks, making it a “spicy but not spicy” scheme.

Review of the big four banks’ rate wars:

• 7 days highest rate: Fubon 21.3% (new customer exclusive), 25% (new customer)
• 14 days: Fubon 25% (new customer)
• 1 month: PAObank 15% (recommended new customer)
• 2 months: Nanyang 2.25% (Fubon reduced to 2.15% on Friday)
• 3 months: CCB Asia 6.88% (limited to top 20% deposits), alternative 5.88%
• 4 months: Public Finance 2.5% (just beating Fubon 2.45%)
• 5 months: Nanyang 2.4% (reduced by 0.25% on Wednesday)
• Half-year: PAObank 2.9% (extended to end of March)
• 7 months: Public Finance 2.125%
• 9 months: StarStar 2.5% (added 0.1% Thursday)
• 1 year: DnA Bank 2.8% (PAObank reduced to 2.7% on Friday)
• 18 months: DnA Bank 2.8% (leaving HSBC 2.25% behind)
• 2 years: DnA Bank 2.8% (replacing HSBC as top)
• 36 months: Mox 2.3%
• 48 months: Mox 2.3%

Banks compete for “interest erosion” with retail customers

The 3-month HIBOR, reflecting bank funding costs, is currently 2.46%, with a 6-month rate of 2.63%. However, the highest 6-month fixed deposit rate is 2.9%, and the 3-month rate reaches 6.88%, both maturing at the end of this month, highlighting small and medium banks’ tactics to “buy new customers” before quarter-end. The 1-year fixed deposit rate tops at 2.8%, matching the 2.8% HIBOR.

The IPO freeze of hundreds of billions is quickly returning to the market, including: China Circular Packaging Service provider ULS, which has at least HKD 1,175 billion in margin loans; Zhaowei Mechanical and Electrical, with about HKD 2,338 billion in margin loans; along with mainland industrial robot manufacturer Estun, and mainland wireless communication module and solutions provider Megachip, all attracting capital through IPOs.

Citi’s analyst Liao Jiahao predicts the US dollar will rebound above 101 in the second half

All interest rates have fallen, with overnight rates down for two consecutive days, now at 1.86%; the 1-month rate also fell for two days to 2.19%, hitting last August’s low. The total banking system surplus remains HKD 53.8 billion, with the HKD/USD exchange rate temporarily at 7.8185 to 7.8222.

Oil prices remain high, risking inflation resurgence. The market expects the Monetary Authority to refrain from rate cuts in March. The US-Iran conflict may prolong, and the USD index is approaching 99, currently at 98.956.

Citi’s investment strategist and asset allocation head Liao Jiahao forecasts the 3-month rate at 99.67, 6 months to 1 year at 101.88; long-term target at 99.27.

Hang Seng closely follows HSBC’s rate cuts; Standard Chartered cuts 2% for half-year

Additionally, among the four major banks, HSBC, Hang Seng, and Standard Chartered have all started rate cuts in March; Bank of China Hong Kong has temporarily held back.

• Comparison of the four major banks’ official rates:
• #7 days:
  HSBC 7% (for qualified new funds, branch or phone wealth management), 6% (liquidity promotion)
  Standard Chartered 5% (cut by 2% on Feb 10)
  Bank of China HK, Hang Seng 5%
• #1 month:
  HSBC 10% (stock reward plan), 3% (for new funds)
  Hang Seng 3% (launched Jan 2, with HKD 1 million threshold), 2.5% (HKD 10,000 threshold)
  Bank of China 2%
• #3 months:
  HSBC, Hang Seng 2.2% (both cut by 0.2% on March 2)
  Standard Chartered 2.1% (cut by 0.1% on March 2)
  Bank of China 2.1% (cut by 0.3% on Feb 4)
• #6 months:
  HSBC 2% (cut by 0.1% on March 2)
  Standard Chartered 1.95% (cut by 0.05% on March 2)
  Hang Seng 1.9% (cut by 0.2% on Feb 9)
  Bank of China 1.9% (cut by 0.2% on Feb 4)
• #1 year:
  Standard Chartered 2% (cut by 0.2% on Feb 10)

PAObank offers 1-month 15% “extra time competition”

Meanwhile, six digital banks (formerly virtual banks) have taken action this week: Ant Bank, livi bank, Mox, and PAObank have alternately reduced rates; StarStar Bank and Fusion Bank have mixed changes.

• Comparison of digital banks’ short and long-term rates:
• 7 days: Fubon 21.3% (new customer exclusive)
• 14 days: Fubon 25% (new customer)
• 1 month: PAObank 15% (extended to end of March)
• 2 months: StarStar 1.5% (reduced by 0.15% this week)
• 3 months: PAObank 3% (extended to end of March)
• 4 months: StarStar 2.2% (reduced by 0.05% on Friday)
• Half-year: PAObank 2.9% (extended to end of March)
• 9 months: StarStar 2.5% (added 0.1% Thursday)
• 1 year: PAObank 2.7%, StarStar 2.6%, HSBC 2.55%, Ant 2.5%, Fubon (low threshold) 2.4%, Mox 2.3%, ZhongAn 2.01%, livi 2%
• 18 and 24 months: HSBC 2.25%
• 36 and 48 months: Mox 2.3%