Banks raise offshore yuan deposit rates ahead of through train scheme
Hong Kong has been witnessing an industry-wide increase in offshore yuan deposit rates since mid-September as banks scramble for the currency before the through train scheme launch.
The window-dressing needs for year-end balance sheets, an anticipated rise in cross-border funding demand from mainland borrowers and the weakening of offshore yuan that has caused fewer firms to bring yuan to Hong Kong to settle trades, have all caused local banks to woo offshore yuan capital aggressively.
At least eight banks have raised their yuan deposit rates or extended their promotional offers. HSBC and China Construction Bank were the two banks that raised their short-term yuan deposit rates last week, following similar moves by Dah Sing Bank, DBS, Nanyang Commercial Bank and Standard Chartered in early October.
“The rate hikes, mostly very short-term, suggest the banks are expecting the through train scheme will kick off shortly,” said Banny Lam, managing director and co-head of research at ABCI Securities.
“They are competing with each other regardless of short-term costs in order to attract more new clients or encourage existing clients to open yuan accounts to buy renminbi-related products.”
Some banks are even setting deposit rates higher than the lending rate in order to beef up the liquidity pool.
For example, the current one-month interbank lending rate for offshore yuan is 3.34 per cent, while some banks are offering a one-month deposit rate of 5 per cent.
“Unless banks in Hong Kong are offering renminbi on margin financing, I don’t think they will need extra short-term yuan,” said Jim Antos, banking analyst at Mizuho Securities Asia, alluding to the anticipation of the stock connect scheme that will allow Hong Kong and mainland investors to conduct cross-border trade.
Another possible explanation was that some of the funds Hong Kong banks had raised were to meet demand from mainland companies facing much higher borrowing rates as mainland banks struggled with a liquidity crunch, Antos said.
The one-month Shanghai Interbank Offered Rate, the interbank borrowing rate on mainland, now stands at 3.9 per cent.
HSBC on Friday raised its one-week yuan deposit rate from 0.45 per cent to 6.5 per cent per annum, the highest in the city, if a depositor exchanges more than 20,000 yuan (HK$25,236) of other currencies into renminbi.
The highest one-month rate for yuan deposits in the city is being offered by Citibank, at 5 per cent, for clients who are willing to convert Hong Kong dollar deposits into yuan and have a minimum of 20,000 yuan in a time deposit account.
