Hong Kong Futures Exchange (HKFE) has formed a Forecast Panel comprising 10 banks to share their professional views on the outlook of the HIBOR rates with readers of HKFE's bi-monthly newsletter "HIBOR Futures Market Update", published today.
Members of the Forecast Panel comprise ABN-AMRO Bank, The Bank of East Asia, Chase Manhattan Bank, Citibank N.A., DaoHengBank, HSBC Markets, Natwest Markets, Standard Chartered Bank, UBS AG and Wing Lung Bank.
All of them have been asked to forecast the Final Settlement Price of HIBOR Futures on 15 March 1999.
On One-Month HIBOR Futures, their forecasts range from 93.25 to 94.80, and the average is 94.43. On Three-Month HIBOR Futures, their forecasts range from 92.75 to 94.50 and the average is 93.90.
In the cover story of the same publication, Kate O'Donoghue, Regional Economist of Barclays Capital Futures Hong Kong, predicts that as Hong Kong's economy is battered by world events, the risk premium will rise.
Ms O'Donoghue says that recent events in China have negative ramifications for Hong Kong. The fact that the Chinese authorities have allowed the Guangdong International Trust & Investment Corporation to go bankrupt last month reflects their willingness to push ahead with financial reform this year, resulting in slower economic growth in China and hence Hong Kong. As investors begin to reassess the risk of lending to China, Hong Kong risk premiums will be pushed up.
Meanwhile, the Japanese economy shows no sign of recovery, and Japanese banks will be unwilling and unable to lend abroad. As around 15% of credit in Hong Kong is from Japanese banks, this will push the Hong Kong Dollar forward yields further up.
Further afield, Brazil's devaluation will also hit Hong Kong, driving the long-term risk premium to higher levels.
In light of these factors, Ms O'Donoghue expects the Hong Kong Dollar yield curve to steepen.
Another feature article in the publication, written by HKFE's Head of Economic Research Mr Kevin Cheng, is on how banks can use HIBOR Futures to offer their customers fixed rate loans. Details of the arrangements are clearly stated so that investors and the general public can better understand one of the many applications of HIBOR Futures.
HKFE's "HIBOR Futures Market Update" also reviews the performance of the HIBOR Futures market. It reveals that after the relatively quiet cash market in December 1998, trading activity in the HIBOR Futures market has picked up. A total of 50,440 contracts were traded in January this year, up by 96% over December last year. Meanwhile, average daily volume of 2,522 contracts for January 1999 was 90% higher than a year ago.
"HIBOR Futures Market Update", published by the Economic Research Department of the Hong Kong Futures Exchange, is provided to HKFE Members. It is also available at HKFE offices free of charge to interested members of the public.
For further enquiries, please contact HKFE Corporate Communications Manager Miss Chiu Yeung on 2842 9322.