Recovery predicted in sector despite low demand for loans
Hong Kong's banking sector is on its way to recovery, according to Citibank.
Nonetheless, full recovery was not expected to come soon, and loan demand remained week, country corporate officer for Hong Kong Chan Tse-ching said.
'Government statistics illustrate that Hong Kong dollar loans are still declining at a year-on-year rate of about 10 per cent,' Mr Chan said.
'We also feel the loan market for the first year had been dominated by refinancing deals,' he added.
'Without apparent signs of a rapid recovery, the demand for loans to invest in new businesses remains weak.
'There are not many new loan deals around.' Mr Chan said the sluggish loan growth had not been a result of the over-cautious stance banks took in writing new loans.
'Interest rates are much more stable than they were a year ago,' he added.
'With stable interest rates and ample liquidity, banks are always willing to lend.' Mr Chan expected the United States Federal Reserve would raise interest rates by 25 basis points next week.
He added Hong Kong would need to follow the move to raise its interest rates as well under the linked exchange rate system.
However, the timing of the move and the amount of the increase would need to be decided by the market, he added.
'Undoubtedly rising interest rates will slow down our economic recovery,' he said.
'But the Hong Kong Monetary Authority and the society want our exchange rate to continue to remain stable,' he added.
BANKING
