HKD funding costs decline to 0.42% in August

It's fallen for the second consecutive month.

It has been noted that there has been further decline in funding costs, with the average HKD funding costs falling the second month a row to 0.42% in Aug 2014 (0.45% in Jul 2014; 0.44% in 1H14).

According to a research note from Maybank Kim Eng, seasonally, Hong Kong banks have been less aggressive in competing for HKD deposits in 3Q.

With slight easing in HKD funding constraint, Maybank Kim Eng expects most HK-listed banks’ NIM to maintain a stable-to-slight-rising trend in 2014.

Here's more from Maybank Kim Eng:

RMB deposits remained flat. Total RMB deposits (including CDs issued) stayed flat at CNY1.18t in Aug 2014, accounting for 12.0% of total deposits (11.9% in May 2014).

The slight seasonal decline in remittances for RMB cross-border trade settlement (-2.2% MoM in Aug 2014) has offset the positive impact of RMB appreciation.

Meanwhile, without significant IPO effect, HKD deposits (including CDs issued) and USD deposits showed limited MoM growth in Aug 2014 (+13.1% YoY and +12.1% YoY).

Some small banks have aggressively competed for RMB time deposits in recent weeks.

This, coupled with the launch of Shanghai-Hong Kong Stock Connect should help recover RMB deposit growth in Hong Kong in 4Q14.

We maintain our forecast that total RMB deposits in HK will exceed CNY1.3t by end-Dec 2014.