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The Hong Kong Monetary Authority (HKMA) announced today (May 17) the composite interest rate at the end of April 2007.*
The composite interest rate, which reflects the average cost of funds of banks, fell to 2.96% at the end of April 2007, from 3.00% at the end of March 2007 (see Chart 1 in the Annex). This followed a rise of 7 basis points in March 2007 when short-term interbank rates rose due to initial public offering (IPO) activities in the stock market which tied up funds amounting to about HK$213 billion temporarily. The 4 basis-point decrease in the average cost of funds in April mainly reflected the completion of a round of IPO activities in April and the subsequent reversal of short-term interbank rates to their lower levels, while savings deposit rates were unchanged (see Chart 2 in the Annex).** Since US interest rates began increasing in the middle of 2004, the composite interest rate has increased by 272 basis points, compared with upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks by the end of April 2007.
"The composite interest rate has been steady in recent months, with only small variations reflecting changes in short-term interbank rates. Given that a number of IPO activities are in the pipeline, the composite interest rate in the months ahead will continue to be affected by short-term changes in liquidity conditions due to these activities," said Mr Peter Pang, Deputy Chief Executive of the HKMA.
The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of April 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 20 June 2007 and will provide the composite interest rate at the end of May 2007.
* The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest bearing liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and Hong Kong dollar non-interest bearing demand deposits on the books of banks. Data from retail banks, which account for about 90% of the total customers' deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.
** During April 2007, HIBORs for funds with maturity of less than one month fell by 14 to 29 basis points, while HIBORs for funds with maturity of one month or above rose by 3 to 15 basis points.
For further enquiries, please contact:
Sara Yip, Manager (Press), at 2878 8246 or
Peggy Lo, Manager (Press), at 2878 1687
Ends/Thursday, May 17, 2007
Issued at HKT 17:15
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