The lending rate has been cut down to 2.25 per cent (25 basis points) by the Hong Kong Monetary Authority (HKMA), as reported by South China Morning Post.
The rate cut has been done for the second time this year. This has been in line with the rate cut by the US Federal Reserve. This has been done to maintain the peg with the US dollar or for keeping the Hong Kong dollar stable.
The prime rate for the commercial banks will remain constant between a range of 5.125 percent and 5.375 percent.
The leverage for short term borrowers has become cheaper, who seek margin financing to buy stocks. This is for keeping in mind the Budweiser’s IPO, which is the second largest IPO in the world.
“Thursday’s rate cut comes at just the right time for Budweiser’s mega IPO, reducing the cost for investors to subscribe for the new shares,” said the Hong Kong Securities Association’s Chairman Gordon Tsui Luen-on. “As the market is expecting another 50 basis points of rate cuts later this year, borrowing costs will come down, which will encourage more IPOs.”
The last time a series of rate cuts were seen was at the beginning of the 2008 crisis. It had a lasting bullish market sentiment for the Hong Kong property market, which went on for a decade.
Hong Kong is on time with the rate cut, keeping in mind the current state of the economy and the colossal Budweiser IPO. The economy has taken a hit due to the trade wars of the US and China. This will also help to prevent a technical recession in the second last quarter of the financial year.
The rating agencies(Fitch and Moody’s) has made it expensive for the government to borrow money and also for corporations looking to sell debt. The credit rating for Hong Kong has been downgraded.
Logistics real estate developer ESR Cayman said on Friday that like the revival of the Budweiser IPO, it would do the same for its own IPO. It has been valued at US$698.8 million . Home Credit is up for a listing in Hong Kong valued at US$1 billion.It is in talks with institutional investors for the same.
The declining lending rates would benefit the mortgages and loans that are dependent on the HIBOR(Hong Kong Inter-Bank Offer Rate), Tsui said.