As global markets continue to evaluate last week’s interest rate decision, expectations are growing that the Fed will raise interest rates again. Lin Yansheng, the Director of Commercial Banking at Hang Seng Bank, Hong Kong’s largest local bank, recently stated that he expects the Fed to raise interest rates again and believes that the effects of the hike will be temporary. Yansheng also mentioned that due to increasing concerns, the bank felt the need to offer crypto currency services and shared the rules that crypto currency companies need to meet in order to work with the bank. According to these rules, companies that obtain a Principle Approval (AIP) license from the Hong Kong Securities and Futures Commission will be able to open a standard banking account with Hang Seng Bank.
Further interest rate hikes are expected from the Fed
Yansheng acknowledged that unlike mainland China and neighboring regions, the high interest rates in Hong Kong have triggered a slowdown in overall demand for bank loans. Yansheng predicts that credit growth will be under pressure this year and provided a glimmer of hope by stating, “It won’t be long before they are lowered.” He also added that expected interest rate cuts next year will lead to an improvement in credit growth.
The latest statistics from the Hong Kong Monetary Authority show that annualized credit growth has been negative since May and is currently at -1.1%. Yansheng also added that as borrowing rates decline in mainland China, a decrease in credit growth in the Hong Kong banking sector can be expected. The high Hong Kong Interbank Offered Rate (HIBOR) is currently putting pressure on corporate borrowing volumes.
Despite the high interest environment, Yansheng believes that the Fed will only raise interest rates once more and maintain this level for a few months. Yansheng’s prediction is based on the confidence that interest rates in the US will start to decline in 2024, following a decrease in inflation to 3% in June.
Yansheng also evaluated trade loans and stated that the high interest environment has led to these loans being managed by neighboring regions, with some companies even relocating to Southeast Asia due to pressures on mainland China’s manufacturing industry.
Yansheng discussed the growth of the crypto currency market and revealed that roundtable meetings have been organized by the China Securities Regulatory Commission and the Hong Kong Monetary Authority to investigate the challenges faced by crypto currency companies. Yansheng emphasized Hang Seng Bank’s commitment to comply with regulators’ instructions and provide services to crypto currency companies.
Yansheng shared that companies that obtain a Principle Approval (AIP) license from the Hong Kong Securities and Futures Commission will be able to open a standard banking account with Hang Seng Bank. These companies must meet stringent requirements to obtain such permission, making it a challenging process for most companies. So far, only two crypto currency trading platforms, OSL and Hashkey, have been able to obtain this license.