HSBC, one of the banks in Hong Kong that issues banknotes, raised the Hong Kong Dollars (HKD) prime rate by 0.125 percent on Sept. 23. The raise came after the Federal Reserve (Fed) announced a 0.75 percent rate increase in the federal funds at midnight on Sept. 22. The rate hike signifies Hong Kong has officially entered a rate hike cycle.
As the interest rate hike has weakened the property market in Hong Kong, Hong Kong Monetary Authority (HKMA) was expected to devise a rescue plan. The Fed said the rate hike countered inflation while further depreciating the renminbi’s value (RMB). Financial analysts point out that with the current linked exchange rate of HKD to the U.S. Dollar (USD), the economy of Hong Kong, which was already fragile, has to follow the pace of rate hikes in the U.S. The rate hike makes the Hong Kong market even worse….