The Hong Kong Futures Exchange's (HKFE) panel of forecasters from 10 banks predicts that with the demand for interbank funds likely to rise in the next few months due to further expansion of the local economy, the three-month Hong Kong interbank offered rate (HIBOR) will be higher on 16 October compared to its 15 August level. The panel also sees one-month HIBOR rising between now and mid-October. Both forecasts appear in the latest edition of the HKFE's "HIBOR Futures Market Update" newsletter, published today.
The average forecasts for the final settlement prices of One-month and Three-month HIBOR Futures on 16 October show panellists expect one-month HIBOR to be 5.89% on that date and three-month HIBOR to be 6.18%. The forecasts for the one-month rate range from 5.63% to 6.32%, while the forecasts for the three-month rate are between 5.88% and 6.50%. On 15 August, cash market rates for one-month and three-month HIBOR were 5.60% and 5.96% respectively.
The newsletter also features an article on the Hong Kong dollar interest rate outlook by NatWest Markets' Head of Money Market Andy Lim and an introduction to HIBOR Futures Strips, which the HKFE plans to introduce soon, subject to Securities and Futures Commission approval.
In the lead article, Mr Lim suggests most of the following factors that have contributed to the decline in Hong Kong dollar interest rates since May will prevent rates from rising much:
- Capital inflows into Hong Kong;
- Favorable political and economic environment in Asia;
- Slowing US economy; and
- Pacific Century CyberWorks' (PCCW) decision to use a US$12 billion loan to fund its acquisition of Cable & Wireless HKT (C&W HKT).
However, he predicts "the Hong Kong dollar yield curve will back up a bit" as the impact of the PCCW/C&W HKFT deal fades. But Mr Lim also says: "The forward points will still be traded at discounts with the continuous inflow of capital into Hong Kong and the strong public confidence in the Hong Kong dollar peg system."
"HIBOR Futures Market Update" is published by the HKFE's Economic Research Department. It is available, free of charge, at the Exchange's offices and the HKFE website (www.hkfe.com).
For further enquiries, please contact HKFE Corporate Communications: Scott Sapp 2842 9421.
* Please note: The August 2000 "HIBOR Futures Market Update" (Issue 13) has also been sent.