The Hong Kong Futures Exchange's (HKFE) panel of forecasters from 10 banks predicts that with the demand for interbank funds likely to weaken, the three-month HIBOR (Hong Kong interbank offered rate) will be lower on 17 July 2000 compared to its level on 15 May 2000. The panel also sees one-month HIBOR easing between now and mid-July 2000. Both forecasts appear in the latest edition of the HKFE's "HIBOR Futures Market Update" newsletter, published today.
The panellists' average forecasts for the final settlement prices of One-month and Three-month HIBOR Futures on 17 July 2000 show they expect the one-month HIBOR to be 6.61% on that date and the three-month HIBOR to be 6.83%. The forecasts for the one-month rate range from 6.00% to 6.91%, while the forecasts for the three-month rate are between 6.44% and 7.06%. On 15 May 2000, cash market rates for one-month and three-month HIBOR were 7.01% and 7.11% respectively.
In the newsletter's opening article, UBS Warburg Economist Raphael Wu looks at whether the Hong Kong dollar is a risk-free currency. Mr. Wu says the Hong Kong dollar's peg to the US dollar is "expected to remain impervious for many years to come." But he also warns the SAR currency is "still highly vulnerable to external shocks and developments in Asia."
Applying his analysis to the Hong Kong dollar fixed income market, Mr. Wu predicts the risk premium at the long end of the yield curve would widen substantially if market participants saw: 1) an imminent renminbi devaluation; 2) high levels of inflation in the US; or 3) financial turmoil in emerging markets. However, he says none of the three are expected in the next 12 months.
The newsletter also includes an article on how home buyers can use HIBOR futures to provide protection against rising mortgage rates as well as a regular review of the HIBOR futures market.
"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: Ms. Chiu Yeung 2842 9322 or Mr. Scott Sapp 2842 9421.
Please note: A copy of the May 2000 "HIBOR Futures Market Update" (Issue 12) is attached for your reference.