From Monday, customers will get just 10 cents for every $10,000 deposited HSBC has slashed its Hong Kong dollar savings interest rate from 0.01 per cent to 0.001 per cent amid a surge of liquidity in the economy, with other banks considering a similar move. From Monday, customers will get just 10 cents for every $10,000 deposited in the bank, down 90 per cent from the $1 they would have received previously. However, the bank will keep its best lending rate at 5 per cent. HSBC general manager Raymond Or Ching-fai yesterday played down the effect the cut would have on customers. 'I don't see it having a big impact because in absolute terms the difference between 0.01 per cent and 0.001 per cent is only very small,' he said. 'We're talking about only a few decimal points here.' The bank said the move was prompted by a strong inflow of capital into Hong Kong, which spurred zero interest rates in the interbank market. The stock market had accelerated since the middle of last month on optimism about strong economic growth and a return of asset price inflation. Average daily turnover this week reached an extraordinary $26.49 billion, 88 per cent above the daily average in the past two months. More money flowing into Hong Kong is coming from China, according to brokers. One noted: 'This money is not just coming from individuals, but also from mainland companies, even top-500 companies that are state-owned.' Banks, meanwhile, have seen a large increase in Hong Kong dollar savings deposits, up 36.8 per cent in the 12 months to November to $902 billion. The M1 money supply surged 36.4 per cent in the same period. Pressure has been growing on the Hong Kong dollar, forcing the Hong Kong Monetary Authority to inject more than $42 billion into the banking system over the past three months - 72 per cent of which happened in the past month - to keep the Hong Kong dollar from rising too much above its peg with the US dollar. HKMA chief executive Joseph Yam Chi-kwong recently warned that if the strength prevailed, the authority could start to charge a penalty fee on banks with too many Hong Kong dollar deposits, encouraging them to park their money in foreign currencies instead. However, the move by HSBC shows a reluctance on the part of banks to do this. 'If the Hong Kong Monetary Authority decides to impose a penalty, we might have to consider shifting this to our customers,' Mr Or said. Other lenders said they would consider a cut. Bank of East Asia said it would consider the possibility, while Wing Lung Bank would discuss it today. Standard Chartered director and Hong Kong Association of Banks chairman Peter Wong Tung-shun said the lender was 'reviewing our portfolio and will make an announcement once we've come to a decision'. The move by HSBC and continued surge in liquidity do pose the prospect of negative interest rates in future. '[The association of banks does] not want to see a negative interest rate. But I can't tell you for sure if this will happen or not. Personally, I think the chances of interest rates going below zero per cent any time this year are low,' Mr Wong said. This was echoed by David Marshall, managing director of Fitch's financial institutions ratings for Asia-Pacific. 'Banks would be more likely to increase the level of fees charged on customers than go into negative territory with interest rates.' While the move by HSBC penalises small savers, it serves as an impetus to depositors to move their cash elsewhere, namely property, and equity and debt products. Brian Coulton, Fitch Ratings head for Asia sovereign ratings, stressed the upside: 'Liquidity should help eventually ease Hong Kong's deflation problem.' Additional reporting by Enoch Yiu, Nichole Chan, Anette Jonsson and Kelvin Wong