Composite Interest Rate : End of January 2008

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) the composite interest rate at the end of January 2008.¹

The composite interest rate, which reflects the average cost of funds of banks, fell by 61 basis points to 1.68% at the end of January 2008, from 2.29% at the end of December 2007 (see Chart 1 in the Annex). This followed an increase of 7 basis points in December 2007. The fall in the composite interest rate in January 2008 reflected downward adjustments across-the-board of local interest rates, including savings and time deposit rates, as well as interbank interest rates (see Chart 2 in the Annex).²

"Looking ahead, the composite interest rate will continue to be influenced by changes in US interest rates and short-term variations in domestic liquidity conditions, given that a number of initial public offerings are in the pipeline," said Mr Peter Pang, Deputy Chief Executive of the HKMA.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of January 2008 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 19 March 2008 and will provide the composite interest rate at the end of February 2008.

For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Hing-fung Wong, Officer (Press), at 2878 1802

Hong Kong Monetary Authority
19 February 2008

¹ The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest bearing liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and Hong Kong dollar non-interest bearing demand deposits on the books of banks. Data from retail banks, which account for about 90% of the total customers' deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.

² Local banks cut their best lending rates on 24 January 2008 by 75 basis points, and adjusted downward their savings deposit rates as well. During January, HIBORs fell across-the-board by 105 to 164 basis points.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.