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Hong Kong’s FX interventions lower key interest rate, lifting the burden for SMEs and mortgage borrowers amid economic slump
- HKMA stepped into market five times since April 21 to sell HK$10.03 billion Hong Kong dollars
- One-month Hibor fell 6 per cent after the interventions
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Multiple forays by Hong Kong’s monetary authority into the foreign exchange market last week to weaken the local currency have also lowered borrowing costs in Hong Kong dollars, a timely boon for struggling companies and mortgage borrowers.
The Hong Kong Monetary Authority (HKMA), the de facto central bank of the city, has stepped into the foreign currency market five times since April 21 to sell a combined HK$10.03 billion (US$1.29 billion) worth of Hong Kong dollars at the upper limit of the currency’s peg at 7.75 per US dollar. The HKMA’s battle against currency speculators had a side effect of lowering a key interest rate in the city.
The move is a windfall for Hong Kong's 340,000 small and medium-sized companies that have been hard hit by months of anti-government protests and the Covid-19 pandemic.
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“A low-interest-rate environment will encourage investors to get bank financing to support start-ups like us,” said Arthur Chan, a director at Hong Kong-based SagaDigits, that helps the government with quarantine monitoring.
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Four in every 10 small and medium-sized enterprises (SMEs), which employ about 45 per cent of non-government employees in Hong Kong, expect their earnings to plunge by 75 per cent over the next year, according to a survey.
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