Hong Kong’s interest rates set to increase

Government expects impact on property market.

Financial Secretary John Tsang said Hong Kong’s interest rates may increase ahead of gains in the U.S. as an outflow of funds will prompt banks to raise rates. He also noted that expectations of rising interest rates could gradually affect the property market.

“If a significant amount of funds leave Hong Kong, local interest rates will be adjusted, which may come earlier than the rate hike in the U.S, There’s no massive outflows for now,” he said.

Hong Kong stocks fell for the sixth week last week, the longest losing streak since October 2008 amid a credit squeeze hammering Chinese banks and concerns about the reduction in U.S. stimulus spending.

Housing prices in Hong Kong have more than doubled to a record since early 2009 on near-record low interest rates and a lack of new home supply. The government has implemented a number of curbs to cool demand to reduce the risks of an asset bubble.

“Those intending to buy homes should be prudent,” said Tsang. “It’s too early to say whether the government should adjust the property measures.”

Federal Reserve Chairman Ben Bernanke last week said policy makers could moderate their pace of bond purchases this year, reducing money being pumped into the U.S. economy. Some of this money has found its way to other countries. Investors are pulling money from emerging markets as the prospect of less liquidity depresses stocks, bonds and currencies in Asia.