• The US Federal Reserve continued to move away from its zero interest rate policy (ZIRP) in December, raising the target federal funds range by 25 bps from 0.25-0.5% to 0.5-0.75%. This was the second time it has raised rates since it adopted ZIRP following the subprime crisis back in 2008. As at the end of December, the Effective Federal Funds Rate (EFFR) had increased by 13 bps to 0.53571%.

• Although the Hong Kong Monetary Authority (HKMA) was quick to react, most banks kept prime lending rates unchanged, netting out any immediate effect for mortgages making referencing to the rates. (Hong Kong Interbank Offer Rate) HIBOR-based mortgages, however, increased slightly as HIBOR moved higher on the back of the US rate rise. 

• Unless a considerable amount of capital moves out of Hong Kong’s interbank market, HIBOR will remain at relatively low levels (Figure 1). To combat the higher HIBOR rates, banks have already started lowering spreads on HIBOR mortgages to keep borrowing costs down. As a result, the latest rate hike is unlikely to have a significant impact on pricing in the city’s housing market. 

• PMI in December increased to 50.3, the first time above the watershed 50 point level that reflects expansion since February 2015 (Figure 2). 

• Unemployment rate edged down to 3.3% in November after remaining broadly stable at 3.4% over the previous eight months (Figure 3).

• Visitor arrivals improved slightly, down 2.1% y-o-y in November, on the back of a 14.1% y-o-y increase in North Asian visitor arrivals (Figure 4). 

• Exports increased by 8.1% y-o-y in November, led by growing exports to major Asian countries (Figure 6).

• Inflation rate dropped to just 1.3% y-o-y in November, marking the second time it has been below 2% since July 2012 (Figure 7).

Click here to view the full JLL Hong Kong Economic Monitor report including all relevant stats and graphs.

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