People walk past a shop on which numerous property agencies have put up advertisement on Friday. HSBC, Hang Seng Bank and Bank of China (Hong Kong) will lower their best lending rates by 25 basis points to 5 percent from 5.25 percent per annum, while Standard Chartered Bank and Bank of East Asia will also reduce their prime lending rate by 25 basis points to 5.25 percent from 5.5 percent. AFP

Hong Kong banks announced on Friday that they will cut their prime lending rates by 25 basis points, following a slash in the interbank rates as the Hong Kong Monetary Authority (HKMA) has injected money into the territory's banking system.

It is the first reduction since March, despite a series of cuts in the US due to financial turmoil. Property developers see rate cut as a positive sign for the market.

HSBC, Hang Seng Bank and Bank of China (Hong Kong) will lower their best lending rates by 25 basis points to 5 percent from 5.25 percent per annum, while Standard Chartered Bank and Bank of East Asia will also reduce their prime lending rate by 25 basis points to 5.25 percent from 5.50 percent.

The reduction will be implemented in Bank of China (Hong Kong) on Nov 8, while it will also take effect in the other four banks from Nov 10.

It is the first reduction since March, after central banks in the US, Europe and Asia cut their interest rates consecutively amid the global financial crisis.

As to relieve the interbank rates and keep the Hong Kong dollar within its pegged trading band with the US dollar, the HKMA injected HK$1.32 billion into the territory's banking system on Friday.

It is the fifth injection in the past week, bringing the total to around HK$9.67 billion.

Hong Kong interbank rate (Hibor) dropped significantly following several injections by the HKMA.

The one-month Hibor, which peaked at around 4.99 percent on Oct 10, slid to 1.19 percent on Friday, the lowest since February 2005.

While the three-month Hibor closed down to 2.23 percent, the lowest level since the collapse of Lehman Brothers on Sept 17.

HSBC, the biggest bank in the territory, was the first to announce a prime rate reduction on Friday. Executive director Peter Wong said the one-month Hibor has dropped to almost 1 percent, which provides sufficient room for a rate cut.

"The reduction will lower the burden of the mortgage borrowers and the small- and medium-enterprises (SMEs), it may also help stimulate our local economy," Wong said, adding that the bank is willing to help enterprises to manipulate their financial difficulties.

Benjamin Hung, executive director and chief executive officer of Standard Chartered, said the adjustment will be a relief to the SMEs and the property owners, amid the current economic situation.

Ricky Wong, an executive director of Wheelock Properties, said the property market will be stabilized after the rate cuts.

"The decision will have a positive impact on the property market as it would be easier for home buyers to borrow money," Wong said, "the number of transactions is unlikely to jump drastically, but the sentiment will be improved and the number remains steady."

He expects banks to slash prime rates by at least 50 basis points in the rest of this year.

(HK Edition 11/08/2008 page2)