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Wednesday, 8 October 2008
HKMA Cuts Key Rate by 1pc as Central Banks Pump in Billions More
HKMA said the base rate would now be calculated using the US Federal Reserve’s benchmark plus 50 basis points, meaning the Hong Kong rate would effectively be reduced to 2.5 per cent from 3.5 per cent. PDF
HKMA Cuts Key Rate by 1pc as Central Banks Pump in Billions More
Agence France-Presse 8 October 2008
The Hong Kong Monetary Authority announced it will cut its key interest rate by 100 basis points from Thursday, as central banks across the region continued to pump in billions of dollars into the system to address the credit crunch that has wreaked havoc on markets worldwide.
HKMA said the base rate would now be calculated using the US Federal Reserve’s benchmark plus 50 basis points, meaning the Hong Kong rate would effectively be reduced to 2.5 per cent from 3.5 per cent.
It followed a strong hint from Fed chief Ben Bernanke that a US rate could be coming soon.
Hong Kong’s currency is pegged to the US dollar, and the city usually follows changes to the US rate. But HKMA chief executive Joseph Yam Chi-kwong said the decision had taken account of the current conditions on global markets.
He said he hoped the move would ease the pressure on banks to increase lending rates in the face of tight credit markets.
But the short-term Hong Kong interbank offered rates (Hibor) were higher on Wednesday even after the HKMA’s announced its cut in its interest rates.
The overnight Hibor was fixed at 2.11429 per cent at 11.15am HK time, up from 1.75000 per cent on Monday following the Chung Yeung Festival holiday on Tuesday.
The one month Hibor rose to 4.39714 per cent from Monday’s 4.08214 per cent.
Meanwhile Japan and Australia pumped US$15 billion into money markets as governments across the region tried to ease the credit crunch pummelling world stock markets.
“These sorts of measures aren’t working anymore,” said Hiroichi Nishi, a broker at Nikko Cordial in Japan. “It’s like you’re trying to pump blood into a heart with clogged arteries.”
The Bank of Japan injected 1.5 trillion yen (HK$114.99 billion) into the money markets, its 16th straight day of intervention, while Australia’s central bank pumped in A$1.21 billion (HK$6.77 billion).
Governments are trying to keep funds available to fight off the credit crunch, first sparked by the subprime loans mess in the United States that set off a chain reaction of chaos on world markets.
Officials said Britain was set to announce a rescue package for its ailing banking industry before markets opened there, after key bank shares tumbled 40 per cent on Tuesday amid a global sell-off by panicked investors.
In Washington, the US Federal Reserve said it would buy up short-term debt in an effort to kick-start credit flows, describing the move as “necessary to prevent substantial disruptions to the financial markets and the economy”.
And European finance ministers agreed to increase an EU-wide savings deposit guarantee to 50,000 euros (HK$528,000) from 30,000, saying they would coordinate their response to the financial crisis.
But nothing has worked so far to slow a sell-off on share markets across the globe.
Iceland, which has been hit hard by the crisis, meanwhile nationalised its second largest bank, Landsbanki, and gave its biggest, Kaupthing, a US$678 million loan. Its third largest bank was nationalised last week.
Russia also agreed to negotiate a 4 billion euro emergency loan to help Iceland’s fight against national bankruptcy.
The European Central Bank pumped US$50 billion back into interbank money markets, but it said banks sought more than twice that amount.
European stock markets had a mixed performance on Tuesday, with gains in Paris and London and a drop in Frankfurt.
The London FTSE 100 index of leading shares rose 0.35 per cent and the CAC 40 in Paris gained 0.55 per cent, while in Frankfurt, the DAX fell 1.12 per cent.
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HKMA Cuts Key Rate by 1pc as Central Banks Pump in Billions More
Agence France-Presse
8 October 2008
The Hong Kong Monetary Authority announced it will cut its key interest rate by 100 basis points from Thursday, as central banks across the region continued to pump in billions of dollars into the system to address the credit crunch that has wreaked havoc on markets worldwide.
HKMA said the base rate would now be calculated using the US Federal Reserve’s benchmark plus 50 basis points, meaning the Hong Kong rate would effectively be reduced to 2.5 per cent from 3.5 per cent.
It followed a strong hint from Fed chief Ben Bernanke that a US rate could be coming soon.
Hong Kong’s currency is pegged to the US dollar, and the city usually follows changes to the US rate. But HKMA chief executive Joseph Yam Chi-kwong said the decision had taken account of the current conditions on global markets.
He said he hoped the move would ease the pressure on banks to increase lending rates in the face of tight credit markets.
But the short-term Hong Kong interbank offered rates (Hibor) were higher on Wednesday even after the HKMA’s announced its cut in its interest rates.
The overnight Hibor was fixed at 2.11429 per cent at 11.15am HK time, up from 1.75000 per cent on Monday following the Chung Yeung Festival holiday on Tuesday.
The one month Hibor rose to 4.39714 per cent from Monday’s 4.08214 per cent.
Meanwhile Japan and Australia pumped US$15 billion into money markets as governments across the region tried to ease the credit crunch pummelling world stock markets.
“These sorts of measures aren’t working anymore,” said Hiroichi Nishi, a broker at Nikko Cordial in Japan. “It’s like you’re trying to pump blood into a heart with clogged arteries.”
The Bank of Japan injected 1.5 trillion yen (HK$114.99 billion) into the money markets, its 16th straight day of intervention, while Australia’s central bank pumped in A$1.21 billion (HK$6.77 billion).
Governments are trying to keep funds available to fight off the credit crunch, first sparked by the subprime loans mess in the United States that set off a chain reaction of chaos on world markets.
Officials said Britain was set to announce a rescue package for its ailing banking industry before markets opened there, after key bank shares tumbled 40 per cent on Tuesday amid a global sell-off by panicked investors.
In Washington, the US Federal Reserve said it would buy up short-term debt in an effort to kick-start credit flows, describing the move as “necessary to prevent substantial disruptions to the financial markets and the economy”.
And European finance ministers agreed to increase an EU-wide savings deposit guarantee to 50,000 euros (HK$528,000) from 30,000, saying they would coordinate their response to the financial crisis.
But nothing has worked so far to slow a sell-off on share markets across the globe.
Iceland, which has been hit hard by the crisis, meanwhile nationalised its second largest bank, Landsbanki, and gave its biggest, Kaupthing, a US$678 million loan. Its third largest bank was nationalised last week.
Russia also agreed to negotiate a 4 billion euro emergency loan to help Iceland’s fight against national bankruptcy.
The European Central Bank pumped US$50 billion back into interbank money markets, but it said banks sought more than twice that amount.
European stock markets had a mixed performance on Tuesday, with gains in Paris and London and a drop in Frankfurt.
The London FTSE 100 index of leading shares rose 0.35 per cent and the CAC 40 in Paris gained 0.55 per cent, while in Frankfurt, the DAX fell 1.12 per cent.
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