[Hong Kong Dollar Fixed Deposit] 1-Year Hong Kong Dollar Fixed Deposit with a maximum interest rate of 2.8% earns 14,000; 19 other banks and smaller banks closely follow HSBC in reducing interest rates

▲ Hong Kong Dollar Fixed Deposit Rate Cut Intensifies

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As the US and Iran enter the 6th day of conflict, reports suggest the fighting may extend into September. Investors seek safe havens in the Middle East, viewing the Hong Kong dollar as a “stable coin,” causing interest rates across the board to fall. No wonder, this week alone, 19 banks have cut Hong Kong dollar fixed deposit rates (much more than 12 last week), the most this year, including today (March 6) when 7 banks (Fubon, Standard Chartered International, DBS, Mox, Ant, StarStar, and PAO) reduced rates again. Conversely, some banks have unexpectedly increased rates after cuts (2 banks last week).

The rate cut wave is expected to last at least half a month, with patience needed until the end of the month. As the first quarter ends and interest rate hikes become possible, there are three main reasons:

1. Middle Eastern funds flocking to Hong Kong: Iran crisis prompts hot money to seek refuge.

2. Gulf War unlikely to resolve quickly: Foreign reports indicate U.S. military actions against Iran could last at least 100 days, possibly extending to September, rather than the 4-5 weeks suggested by Trump. The market fears a prolonged US-Iran conflict, which may delay major development projects and leave high-yield deposit options limited.

3. Major banks leading rate cuts: HSBC was the first in March to lower fixed deposit rates, followed by small and medium banks, sparking a rate-cut frenzy.

In total, 25 Hong Kong banks adjusted fixed deposit rates this week, with 19 banks decreasing (including DBS, ICBC, Fubon, Bank of China Hong Kong, PAObank, HSBC, Hang Seng, Standard Chartered, ICBC Asia, Nanyang Commercial Bank, Shanghai Commercial Bank, CCB, OCBC Wing Hang, Public Finance, Ant, HSBC Legg, Lee Hoi, Mox), and 6 banks both increasing and decreasing (such as Standard Chartered short-term cut and long-term increase, Fubon, StarStar, and Chuangxing both increased then decreased, while Public Bank and Dah Sing decreased then increased).

Small and medium banks defy the trend with surprising offers: 2.8% interest rate

With the US-Iran prolonged conflict, Hong Kong banks pause rate cuts! The March start continues to be dominated by rate reductions, but this week still saw two record-high rates: 18-month and 24-month deposits. The top interest rate rankings saw major reshuffling across five deposit periods: 2 months, 4 months, 1 year, 18 months, and 2 years.

The biggest surprise this week is Dah Sing, which offered 2.8% for 1-year, 18-month, and 24-month deposits, requiring only new customers with a minimum of HKD 100,000. For a maximum of HKD 500,000, the 1-year fixed deposit could earn up to HKD 14,000 in interest. Two new features:

1. Flexible withdrawal: interest paid monthly (about HKD 1,166 per month on HKD 500,000), or partial principal and interest each month.

2. Increased liquidity.

This is the second bank after Mox to promote flexible interest payments on fixed deposits, rather than waiting for maturity to return principal and interest. However, note that frequent withdrawals reduce the principal, which in turn reduces interest earned and compounded growth—“spicy but not spicy.”

Review of the big bank rate wars:

• 7-day highest rate: Fubon 21.3% (for new customers only)
• 14-day: Fubon 25% (new customers)
• 1-month: PAObank 15% (for recommended new customers)
• 2-month: Nanyang Commercial 2.25% (Fubon reduced to 2.15% on Friday)
• 3-month: CCB 6.88% (for the top 20% of deposits), alternative 5.88%
• 4-month: Public Finance 2.5% (just beating Fubon 2.45%)
• 5-month: Nanyang Commercial 2.4% (reduced by 0.25% on Wednesday)
• Half-year: PAObank 2.9% (extended to end of March)
• 7-month: Public Finance 2.125%
• 9-month: StarStar 2.5% (added 0.1% Thursday)
• 1-year: Dah Sing 2.8% (PAObank reduced to 2.7% on Friday)
• 18 months: Dah Sing 2.8% (leaving HSBC Legg 2.25% behind)
• 2 years: Dah Sing 2.8% (replacing HSBC Legg as top)
• 36 months: Mox 2.3%
• 48 months: Mox 2.3%

Small and medium banks’ counterattack: “Eroding interest to attract deposits”

The three-month HIBOR (Hong Kong Interbank Offered Rate) is now 2.46%, half-year at 2.63%; but the highest fixed deposit rate for half-year is 2.9%, and 3-month rate reaches 6.88%, with both due at the end of this month. This highlights how small banks are competing fiercely before quarter-end, mainly to attract new customers at a cost. The 1-year fixed deposit rate tops at 2.8%, matching the 2.8% HIBOR.

IPO funds totaling hundreds of billions are flowing back: China Circular Packaging Service provider Ule Sai shares, brokerages lending out at least HKD 117.5 billion margin financing; Zhaowei Mechanical and Electrical about HKD 233.8 billion, plus mainland industrial robot maker Estun, mainland wireless communication modules and solutions provider Migu Smart, all locking in funds through IPO.

Citibank analyst Liao Jiahao predicts the US dollar will rebound above 101 in the second half of the year.

Interbank rates have fallen across the board, with overnight rates down for two consecutive days, now at 1.86%; the 1-month interbank rate also fell for two days to 2.19%, hitting last August’s low. The banking system’s total liquidity remains at HKD 53.8 billion, with the HKD/USD exchange rate early morning at 7.8185 to 7.8222.

Oil prices remain high, risking inflation resurgence. The market expects the Monetary Authority to refrain from rate cuts in March. The US-Iran conflict may prolong, and the US dollar index is approaching 99, currently at 98.956.

Citi’s investment strategist Liao Jiahao forecasts the 3-month USD rate at 99.67, half-year to 1 year at 101.88; long-term target at 99.27.

Hang Seng follows HSBC’s rate cuts; Standard Chartered withdraws 2% half-year rate

Additionally, among the four major banks, HSBC, Hang Seng, and Standard Chartered have all cut rates at the start of March; Bank of China Hong Kong has temporarily held back.

Compare the official rates of the four major banks:

• 7 days: HSBC 7% (for qualified new funds, branch or phone banking), 6% (liquidity promotion) Standard Chartered 5% (cut by 2% on Feb 10) Bank of China HK, Hang Seng 5%
• 1 month: HSBC 10% (stock reward plan), 3% (for new funds) Hang Seng 3% (launched Jan 2, HKD 1 million threshold), 2.5% (HKD 10,000 threshold) Bank of China 2%
• 3 months: HSBC, Hang Seng 2.2% (both cut by 0.2% on March 2) Standard Chartered 2.1% (cut by 0.1% on March 2) Bank of China 2.1% (cut by 0.3% on Feb 4)
• Half-year: HSBC 2% (cut by 0.1% on March 2) Standard Chartered 1.95% (cut by 0.05% on March 2) Hang Seng 1.9% (cut by 0.2% on Feb 9) Bank of China 1.9% (cut by 0.2% on Feb 4)
• 1 year: Standard Chartered 2% (cut by 0.2% on Feb 10)

PAObank offers 15% for 1 month “extra time to compete”

Meanwhile, six digital banks (formerly virtual banks) have taken action this week: Ant Bank, livi bank, Mox, and PAObank have alternately cut rates; StarStar Bank and Fusion Bank have varied their rates.

Comparison of digital bank short-term and long-term rates:

• 7 days: Fubon 21.3% (for new customers only)
• 14 days: Fubon 25% (new customers)
• 1 month: PAObank 15% (extended to end of March)
• 2 months: StarStar 1.5% (down 0.15% this week)
• 3 months: PAObank 3% (extended to end of March)
• 4 months: StarStar 2.2% (down 0.05% Friday)
• Half-year: PAObank 2.9% (extended to end of March)
• 9 months: StarStar 2.5% (up 0.1% Thursday)
• 1 year: PAObank 2.7%, StarStar 2.6%, HSBC Legg 2.55%, Ant 2.5%, Fubon (low threshold) 2.4%, Mox 2.3%, ZhongAn 2.01%, Lee Hoi 2%
• 18 and 24 months: HSBC Legg 2.25%
• 36 and 48 months: Mox 2.3%