Composite Interest Rate : End of May 2008

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

The composite interest rate, which reflects the average cost of funds of banks, fell slightly by 4 basis points to 0.75% at the end of May 2008, from 0.79% at the end of April 2008 (see Chart 1 in the Annex). This followed a decrease of 19 basis points in April 2008. The mild drop in the composite interest rate in May 2008 reflected downward adjustments of medium-term interbank rates, while savings deposit rates were unchanged (see Chart 2 in the Annex).² However, in the first two weeks of June the liquidity condition in the interbank market appeared to have tightened moderately, with the interbank rates rising across-the-board. Looking ahead, the composite interest rate will continue to be influenced by changes in US interest rates and domestic liquidity conditions.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of May 2008 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 17 July 2008 and will provide the composite interest rate at the end of June 2008.

For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Lilian Goh, Officer (Press), at 2878 8246

Hong Kong Monetary Authority
19 June 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 During May, HIBORs fell for funds with maturity between two and seven months by 4 to 11 basis points, while that for funds with maturity less than two months or more than seven months rose by 0.3 to 79 basis points.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.