GO
| HSI1 | 24,814.23 | +63.45 | 28.07B |
| HSCEI1 | 8,245.48 | +20.08 | 7.16B |
| Back Zoom + Zoom - Block Traded | |
|
2026-09-18 10:27:55 The Federal Reserve raised the target range for the federal funds rate by 25 bps yesterday to 3.75-4%, Citi said in a research report. The median dot plot indicated one more 25 bps rate hike this year, while the forward curve expected three additional rate hikes before end-2027, with the terminal rate projected at 4.5-4.75%. The broker believed the Fed's gradual rate hikes are slightly positive for Hong Kong banks' earnings. However, given the cap on mortgage prime rates and the higher sensitivity of deposit rates to changes in market interest rates, it assumed NIM sensitivity has plummeted under a high interest rate environment. Nevertheless, if US rate hikes exceed expectations and approach 5%, it could become unfavorable for Hong Kong banks, as weaker credit demand and rising asset quality risks may offset potential NIM gains. BOC HONG KONG (02388.HK.HK) is the broker's top pick among Hong Kong banking stocks. The broker noted that HIBOR tends to lag behind Fed rates, while the HKD exchange rate is approaching the weak-side Convertibility Undertaking. Despite Fed rate hikes, major banks have substantial savings deposit balances, while fixed-rate mortgages are common in Hong Kong, resulting in low incentives for banks to raise prime rates. Recently, amid expectations of Fed rate hikes, deposit competition also appears to have intensified, with more banks offering interest rates above 3% for six- to 12-month HKD time deposits. Therefore, although NIM may benefit from rate hikes, the extent of expansion could remain relatively moderate. Based on the broker's static analysis, every 25 bps rise in the rate differentials between the HK and US would boost earnings of BOC HONG KONG and BANK OF E ASIA (00023.HK) by about 3.5% respectively. However, after taking into account the migration of deposits to time deposits during the rate hike cycle, actual sensitivity may be lower. HSBC HOLDINGS (00005.HK) and STANCHART (02888.HK), due to existing hedging, have lower earnings sensitivity of about 0.3-0.4% for every 25 bps increase. ~ AASTOCKS Financial News Website: www.aastocks.com | |