Provide a "second discount" for intermediaries to profit from, with short-term deposit interest rates as high as 7%! The craze for opening accounts in Hong Kong is rising again to attract funds | deposits | interest rates

Source: Wang Fangran from First Financial

As Hong Kong deposit interest rates continue to rise, the trend of opening accounts in Hong Kong is still ongoing.

At 9:20 am on July 22nd, a commercial bank branch in Hong Kong near West Kowloon Station had customers queuing up, most of whom were mainland tourists who had just arrived in Hong Kong. The on-site staff told the reporter that you only need to use your Hong Kong and Macao travel permit and ID card to complete the account opening procedures, but it will take a week to receive the card. You can choose to mail or collect it on-site.

Alan, who is handling the business on-site, is here to attend the Hong Kong Book Fair and will open an account on the way. He told reporters that he heard that deposits, insurance and other products in Hong Kong are very popular now, and this time, he opened an account first to prepare for any future needs.

Behind the trend of opening accounts in Hong Kong, the difference in deposit interest rates between mainland China and Hong Kong is gradually widening.

On the one hand, under the linked exchange rate system, Hong Kong closely follows the pace of interest rate hikes by the Federal Reserve. In 2022, the Hong Kong Monetary Authority raised the benchmark interest rate from 0.5% to 4.75%, and further raised it to 5.75% in 2023. Deposit interest rates continue to rise, and in order to further attract deposits, some banks have also launched short-term high interest deposits for new customers, with some short-term interest rates as high as 7.28%. On the other hand, the deposit interest rates of mainland banks are in the range of adjustment this year, and the fixed deposit interest rates have basically bid farewell to the era of 3%.

However, some industry insiders told reporters that although there is indeed a deposit interest rate difference between the two regions at present, caution is still needed when switching to foreign exchange under factors such as exchange rate fluctuations.

There is a significant difference in deposit interest rates between the two regions

In early August, the reporter inquired about the Hong Kong dollar deposit interest rates of multiple banks in Hong Kong, and found a significant gap with the deposit interest rates in mainland China. Taking six-month fixed deposits as an example, the highest annualized interest rate for Hong Kong dollar fixed deposits ranges from 3.6% to 4.43%. Among them, China Merchants Wing Lung Bank, DBS Bank, Nanyang Commercial Bank, and CITIC Bank meet certain conditions, and the annualized interest rate can reach over 4%.

Some deposit products targeting high net worth individuals may have higher interest rates. Industry insiders told reporters that some banks can currently apply for VIP interest rates for deposits above HKD 1 million. For example, Dah Sing Bank has a minimum deposit of HKD 1 million for new funds from designated wealth management clients, with an annualized interest rate of 4.7%. If Fubon Bank deposits new funds of HKD 1 million, the annualized interest rate is 4.5%.

Compared to this, the interest rates for deposit restricted products of mainland banks during the same period are significantly lower. According to incomplete statistics by reporters, the six-month fixed deposit interest rates of state-owned banks and some joint-stock banks in mainland China have basically dropped to below 2%.

Why is the deposit interest rate in Hong Kong constantly rising? Industry insiders told reporters that this is related to the Federal Reserve's continuous interest rate hikes. Under the linked exchange rate system, the Hong Kong dollar interest rate basically follows the US dollar. If the Hong Kong dollar interest rate is lower than the US dollar, funds will flow from the Hong Kong dollar into the US dollar, triggering a weak side exchange guarantee; The opposite is also true. Since March 2022, the Federal Reserve has raised interest rates 11 times in a row, and the current federal benchmark interest rate has been raised to 5.25% to 5.5%. The Hong Kong Monetary Authority will raise the benchmark interest rate from 0.5% to 4.75% in 2022, and further increase it to 5.75% from January to August 2023.

In addition to the high interest rates, promotional activities characterized by "short-term" and "high interest rates" have become the secret for many Hong Kong banks to attract customers.

For example, CITIC Bank launched an activity from August 1st to August 30th, during which joint venture new customers can purchase a certain Monopoly deposit product and receive a maximum annualized interest rate of 7.28%. However, the staff of the bank told reporters that the current actual interest rate is a tiered rate, which is 2% from the purchase date to September 30, and the interest rates for the next two months are 3.88% and 7.28%, respectively. According to rough estimates by reporters, if you buy this product in mid August, the actual interest rate will be around 4%.

ZA Bank launched a new customer patent on August 5th. After successfully opening an account in Hong Kong using an invitation code, customers can receive a 4.39% Hong Kong dollar fixed deposit interest rate coupon, plus a basic annual interest rate of 2.21%. New customers can receive a maximum fixed deposit interest rate of 6.6%.

A Hong Kong banking industry insider told reporters that the recent deposit promotion activities in Hong Kong have a clear purpose and tend to "circle" high net worth individuals, with short-term and high interest rates as the main characteristics, mainly to attract customers to exchange currency and guide funds to flow into Hong Kong.

Be wary of exchange rate fluctuations

The continuous increase in deposit interest rates has further stimulated the trend of opening accounts in Hong Kong.

The First Financial reporter learned from several individuals in Hong Kong banks that opening accounts in Hong Kong is currently booming, with long queues and long appointment cycles. "Generally speaking, many banks in Hong Kong require appointments to open accounts. Due to the large number of people, it is normal to wait for 1-2 weeks after making an appointment." A Hong Kong banking industry insider told reporters that in fact, some banks have made emergency adjustments to their personnel and business lines to cope with a large number of mainland customers opening accounts in Hong Kong, such as expanding the size of relevant teams and temporarily extending the operating hours of some branches.

A few banks that do not require appointments, can handle on-site transactions, and have relatively low thresholds have become popular for queuing up to open accounts. For example, the Bank of China Hong Kong Hong Kong City Branch, known as the "Internet celebrity account opening point," usually dispatches numbers at 8:30 am, but customers start queuing up at 7 am.

The time cost is only the first hurdle for mainland tourists to open accounts in Hong Kong. According to the above-mentioned banking professionals, some banks also need to provide the address or asset proof of the account holder in Hong Kong. A customer who went to Hong Kong to open a card told reporters that two weeks after making an appointment in July, she failed to open an account due to failing the relevant qualification review, which also led to her original plan to purchase Hong Kong insurance being repeatedly put on hold.

It is worth noting that while mainland customers are becoming more popular in opening accounts in Hong Kong, some "account opening intermediaries" have also emerged, specifically providing Hong Kong account opening services for mainland customers. An account opening agent told reporters that there is currently a strategic cooperation with banks, and they have obtained a quota that does not require proof of assets such as deposits and wealth management. This includes direct face-to-face interviews with HSBC, Standard Chartered Bank, and CITIC Bank in Hong Kong, allowing them to obtain bank cards for their accounts. And the "second discount" she gave in August ranges from 1880 yuan to 2880 yuan per household.

"There may not be a quota available every day, but it's best to do so early if you're interested," the agent added.

In fact, since the beginning of this year, the trend of opening accounts in Hong Kong has continued to heat up. The latest data from the Hong Kong Immigration Department shows that the number of inbound and outbound visitors exceeded 20 million in July, reaching 20.68 million, an increase of nearly 20% from June, setting a new high since customs clearance. Among them, there are a large number of mainland customers who have opened accounts in Hong Kong. According to data from Bank of China Hong Kong, the number of new cross-border accounts opened by the bank in the first quarter of this year increased by nearly 1.7 times compared to the fourth quarter of last year, with a relatively high proportion of mainland customer business. Or it may also be boosted by the wave of account opening. In the first quarter of this year, Hong Kong's banking revenue increased by 30.6% year-on-year and 3.7% month on month.

However, some industry insiders believe that caution should be exercised when opening an account in Hong Kong and exchanging foreign currency for boarding. In his view, there is a certain risk in purchasing Hong Kong dollar and US dollar deposits at banks in Hong Kong. On the one hand, there is currently a price difference between foreign exchange purchases and settlements, resulting in certain exchange losses. On the other hand, factors such as exchange rate fluctuations need to be considered. After this, if the Hong Kong dollar and US dollar depreciate, it will be difficult to achieve the expected returns.

Liu Yinping, an analyst at Rong360 Digital Technology Research Institute, believes that if the US dollar deposit interest rate in Hong Kong is higher than that in mainland China, and after considering the transportation and labor costs between the two places, it is still profitable, then opening a deposit in Hong Kong is relatively cost-effective. However, investors still need to pay attention to the fluctuations in the exchange rate between the US dollar and the Chinese yuan. If the US dollar depreciates, the actual returns of investors will be discounted.

In fact, there is a possibility of a decline in the US dollar and Hong Kong dollar in the future. In the 12 interest rate meetings held from March 2022 to present, the Federal Reserve has raised interest rates 11 times to combat inflation, with a cumulative increase of 525 basis points. The lower than expected CPI increase in July in the United States indicates that inflation has been somewhat restrained. Recently, many institutions believe that the Federal Reserve's interest rate hike may come to a temporary end in September. Goldman Sachs predicted in a recent research report that the Federal Reserve will not raise interest rates again this year and will gradually lower rates on a quarterly basis starting in the second quarter of 2024.