【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 HKD as a “stable coin,” causing a nationwide decline in interest rates. It’s no wonder that this week, 19 banks competed to cut HKD fixed deposit rates (significantly more than last week’s 12), the highest this year, including seven 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 increased last week).

The rate cut wave is expected to last at least half a month, with patience needed 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 flocking to Hong Kong: Iran crisis prompts hot money to seek refuge

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 Trump’s earlier estimate of 4-5 weeks. Market expects a prolonged US-Iran conflict, which may delay major development projects and limit high-yield deposit options.

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

In total, 25 Hong Kong banks adjusted fixed deposit rates this week, with 19 banks lowering rates (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), and 6 banks both increasing and decreasing rates (ICBC short-term cut, long-term increase; Fubon, StarStar, CCB, and CCB again, both increased and decreased).

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

With the US-Iran prolonged conflict, HK banks have paused rate hikes! March started with continued rate cuts, but this week saw two record highs: 18-month and 24-month deposits. The top rate reshuffle involved five deposit tenors: 2 months, 4 months, 1 year, 18 months, and 2 years.

The biggest surprise is DCB, which offered 2.8% for 1-year, 18 months, and 24 months, requiring only new customers with a minimum deposit of HKD 100,000. For a HKD 500,000 limit, the maximum interest earned is HKD 14,000. Two new features:

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 Flexible withdrawal: interest can be withdrawn monthly (about HKD 1,166 for HKD 500,000), or partial principal and interest each month

2. Increased liquidity

This is the second bank after Mox to promote flexible interest payout on fixed deposits, rather than waiting for maturity to return principal and interest. However, note that continuous withdrawals reduce principal, and accumulated interest also shrinks, making it a mixed bag.

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

Banks compete fiercely for retail deposits amid “interest erosion”

The 3-month interbank rate, reflecting bank funding costs, is now 2.46%, with a half-year rate of 2.63%. However, the highest fixed deposit rate for half-year is 2.9%, and for 3 months, it reaches 6.88%, both maturing at the end of this month, highlighting small and medium banks’ strategy to attract new customers before quarter-end, effectively “buying new clients” at a cost. The top 1-year rate is 2.8%, matching the 2.8% interbank rate.

IPO funds totaling hundreds of billions are flowing back: China Circular Packaging Service provider ULS Shared, brokerages lending out at least HKD 117.5 billion margin financing; Zhaowei Mechanical and Electrical about HKD 233.8 billion, plus mainland industrial robot maker Estun, and mainland wireless communication module and solutions provider Megachip, all locking in funds through IPO.

Citi’s Lai Ka-ho predicts the US dollar will rebound above 101 in the second half

Interbank rates have fallen across the board, with overnight rates dropping for two consecutive days to 1.86%; the 1-month interbank rate also fell to 2.19%, hitting last August’s low. The banking system’s total reserves remain at HKD 53.8 billion, with the HKD/USD exchange rate temporarily between 7.8185 and 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 US dollar index approaches 99, currently at 98.956.

Citi’s chief investment strategist Lai Ka-ho 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 0.2% for half-year

Additionally, among the four major banks, HSBC, Hang Seng, and Standard Chartered all cut rates at the start of March; Bank of China Hong Kong has temporarily held steady.

• Comparison of the four major banks’ published 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, 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 15% for 1 month, “adding time to compete”

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 adjustments.

• 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%
• 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%