Core Insights - The latest Central Region Index (CRI) for May shows a rental yield of 3.54%, marking a month-on-month increase of 0.06 percentage points, the highest level since December 2011 [1] - The Hong Kong property market is experiencing a recovery, with increased buyer interest, although second-hand property prices remain constrained due to low promotional prices for new developments [1] - The rental market is active, entering a seasonal peak, which is driving rental yields above the 3.5% level [1] Rental Yield Trends - The CRI_Mass rental yield for May is reported at 3.70%, up 0.07 percentage points month-on-month, while the CRI for small units is at 3.66%, also up 0.07 percentage points [2] - The CRI for large units stands at 2.89%, reflecting a month-on-month increase of 0.02 percentage points, returning to levels seen in February 2012 [2] - In Kowloon, the CRI_Mass yield is 3.73%, up 0.13 percentage points, the second highest since November 2011 [2] Regional Performance - The rental yield in Hong Kong Island for CRI_Mass is 3.67%, up 0.11 percentage points, reaching a 14-year high since November 2010 [2] - New Territories West CRI_Mass yield remains stable at 3.73%, while New Territories East shows a slight decline to 3.63%, down 0.02 percentage points [2] - Among 143 surveyed estates, 133 have rental yields exceeding the H mortgage rate of 2.77%, indicating over 90% of estates are yielding more than rental costs [2] Notable Estates - Estates with rental yields above 4% include: 嘉辉花园 (5.41%), 得宝花园 (5.04%), 南丰新村 (4.96%), 美景花园 (4.57%), and 华景山庄 (4.57%) [2] - Other notable estates include 杏花村 (3.76%), 太古城 (3.51%), and 美孚新村 (4.37%) [3]

Core Viewpoint - The current Hong Kong dollar (HKD) market dynamics indicate a significant interest rate spread between Hong Kong and the US, making carry trades still profitable and keeping the HKD close to the 7.85 level [1] Group 1: Market Conditions - The interest rate differential between Hong Kong and the US remains wide, which supports the profitability of carry trades [1] - The HKD is expected to remain near the 7.85 level due to supply and demand changes in HKD funds and other uncertainties, including US Federal Reserve monetary policy and global financial market conditions [1] Group 2: Potential Triggers - The "weak side convertibility guarantee" may be triggered again, with its extent and timing influenced by market conditions, particularly the supply and demand for funds [1] - As the HKD supply and demand approach balance, an upward adjustment in HKD interbank rates may become more apparent, indicating increased sensitivity of HKD interbank rates to market liquidity changes [1] Group 3: Future Expectations - Market participants should be prepared for potential upward adjustments in Hong Kong interest rates [1]

Core Viewpoint - The Hong Kong Interbank Offered Rate (HIBOR) has been declining, with the one-month HIBOR falling for six consecutive days to a new three-year low of 0.58964% [1] Short-term Rates - The overnight HIBOR has decreased to 0.02702% - The one-week HIBOR has dropped to 0.18387% - The two-week HIBOR has fallen to 0.38893% [1] Medium to Long-term Rates - The three-month HIBOR has decreased to 1.55% - The six-month HIBOR has fallen to 2.47% - The one-year HIBOR has dropped to 3.09% [1] Market Liquidity - There is an ample supply of Hong Kong dollar liquidity, as indicated by the recent decline in overnight rates - Hong Kong banks borrowed HKD 496 million from the Monetary Authority's discount window for overnight liquidity, marking the first instance this month [1]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) indicates that the Hong Kong dollar (HKD) interbank rates are approaching US dollar rates due to market supply and demand, with current conditions showing an oversupply of HKD funds. Future fluctuations in the HKD exchange rate and interest rates are anticipated, and citizens are advised to consider potential risks in their financial decisions [1][4]. Group 1: Market Conditions - The HKD has recently strengthened due to increased capital market activities, particularly from the southbound stock connect, with the Hang Seng Index rising approximately 10% year-to-date and the technology index up 14% [2]. - In early May, the HKMA intervened in the market, buying a total of $16.7 billion USD and selling 129.4 billion HKD, as the HKD exchange rate approached the strong-side convertibility guarantee level of 7.75 HKD to 1 USD [2][3]. Group 2: Interest Rate Dynamics - Following the HKMA's market intervention, the HKD liquidity surged nearly fourfold, increasing from approximately 45 billion HKD to about 174 billion HKD, leading to a significant drop in interbank rates, with the one-month interbank rate falling from an average of 3.65% in April to 0.96% [3]. - The overnight rate also decreased from an average of 3.41% in April to 0.03%, reflecting normal market behavior under the linked exchange rate system [3]. Group 3: Future Outlook - The future trajectory of the HKD exchange rate and interest rates remains uncertain, influenced by factors such as seasonal demand for funds from new stock offerings and dividend distributions, as well as external factors like US Federal Reserve policies and global financial market conditions [4]. - If the oversupply of HKD persists, the market forces from carry trades may weaken the HKD exchange rate, potentially leading to a rise in HKD interbank rates, which could approach US dollar rates [4].

Core Viewpoint - The recent decline in Hong Kong's interbank lending rates, particularly the 1-month HIBOR dropping to 0.96%, is significantly easing the mortgage burden for homeowners, with actual mortgage rates falling to a new low of 2.26% since July 2022, which is below the average rental yield of 3.5% [1][2] Group 1: Mortgage Market Impact - The drop in mortgage rates has led to a reduction in monthly payments by approximately HKD 3,341, representing a 14.9% decrease for an average mortgage of HKD 5 million [1] - The current mortgage rates being lower than rental yields has resulted in a situation where homeowners are paying less than they would for renting, with the average payment being 8% lower than rental costs [1] Group 2: Market Dynamics - The significant drop in the 1-month HIBOR from 3.98% at the beginning of May to 0.96% today indicates a large fluctuation in short-term interest rates, with a 3% decrease [2] - The widening spread between Hong Kong and US interest rates, now exceeding 3%, is unusual and may lead to adjustments in the HIBOR based on changes in demand for Hong Kong dollars [2] - The influx of funds into Hong Kong is expected to be utilized for various activities, including financial investments and corporate dividends, which may eventually normalize the banking system's surplus and lead to a gradual increase in HIBOR rates [2]