Interest rates appear on the verge of rising in Hong Kong for the first time since the subprime implosion last August.

Bankers are hinting that there is growing pressure to raise the rates along with the increase in the Hong Kong inter-bank offered rate (HIBOR).

Hang Seng Chief Executive Raymond Or said yesterday that the HIBOR has risen steadily in recent weeks, making it more expensive for banks to borrow money.

"You can actually do the calculations," Or said at the Hong Kong Institute of Bankers' annual meeting. "With the cost of capital going up, the banking sector will certainly feel the pressure to increase mortgage rates."

He said he believes the downward cycle for US interest rates has ended, but given the tepid global economic conditions, the chances of a major jump in the American interest rate are relatively slim.

The US Federal Reserve (FED) has trimmed interest rates nine times since last August in an attempt to jump- start its flagging economy - hit hard by the subprime crisis.

So, given its peg to the US dollar, Hong Kong followed suit, bringing deposit rates to practically zero.

Hong Kong and Shanghai Banking Corp Executive Director Peter Wong said that the bank will conduct a full review of interest rates after the US Federal Open Market Committee makes a decision on June 24 regarding the interest-rate direction.

He said that it is unlikely that a change in the Hong Kong interest rate will occur before the Fed's decision.

Hong Kong Monetary Authority Chief Executive Joseph Yam said that even though it is still unclear whether the Fed will hike interest rates later this month, he believes that the tone of recent speeches by Fed Chairman Ben Bernanke seemed to suggest so.

"If you look closely at the recent speeches, you can tell that the Fed wants to send the message that the interest rate" will go up, Yam said. He believes that the Fed wants to use the interest rate as a tool to curb inflation. "I do want it to be successful," he added.

Many Asian economies, including Vietnam, have already begun a wave of interest-rate hikes to tackle runaway inflation.

Looking at the recent tumultuous Vietnam stock market, which has shed more than 60 percent in recent months, Yam said he isn't too worried that the trouble will spread into the broader Asian economy.

"The economies for many countries in the region remain healthy and robust," he said. "However, there are chances that foreign capital might exit the region due to the current conditions."

(HK Edition 06/13/2008 page2)