Summary of Conference Call Records Industry or Company Involved - The discussion primarily revolves around the Hong Kong financial market, specifically focusing on the HIBOR (Hong Kong Interbank Offered Rate) and its implications for the stock market, including A-shares and H-shares. Core Points and Arguments - **HIBOR Increase and Market Dynamics**: The recent rise in HIBOR is attributed to a shift from excessive liquidity to a more normalized level, following government interventions in May and June that significantly impacted market liquidity [1][8]. - **Impact on A-shares and H-shares**: A-shares are expected to maintain an upward trajectory, while H-shares may experience short-term setbacks but are anticipated to rebound [2][13]. - **Market Divergence**: The U.S. market has shown signs of slowing down post-inflation data release, while A-shares continue to rise. In contrast, the Hong Kong market, particularly the Hang Seng Index, has faced declines due to tightening liquidity [3][11]. - **Long-term Effects of HIBOR Increase**: While rising HIBOR typically indicates tighter liquidity, it may not have the traditionally expected suppressive effects on the market due to the current economic context [4][6]. - **Currency and Interest Rate Mechanism**: The relationship between the Hong Kong dollar's peg to the U.S. dollar and the resulting interest rate differentials creates opportunities for arbitrage, influencing market liquidity and HIBOR levels [5][10]. Other Important but Possibly Overlooked Content - **Liquidity Recovery**: The recent increase in HIBOR is seen as a normalization process after an abnormal state of excessive liquidity earlier in the year, which was driven by external economic factors [6][7]. - **Future Market Outlook**: The market is expected to face continued liquidity tightening in the short term, but strategic optimism remains for both Hong Kong and A-shares, particularly with upcoming policy implementations and AI-related trading opportunities [11][14]. - **Global Financial Risks**: The global financial landscape is characterized by heightened risks, with potential impacts on asset allocation and market behavior, particularly concerning the U.S. dollar and its effects on A-shares [12][15]. This summary encapsulates the key insights from the conference call, highlighting the intricate dynamics of the Hong Kong financial market and its interconnections with global economic trends.

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) does not actively set local interest rates but injects liquidity based on market demand, leading to a technical decline in HIBOR as a predictable outcome within the mechanism [1][6]. Group 1: Market Dynamics - Since April, the Hong Kong dollar (HKD) and HIBOR have experienced significant volatility, with short-term rates declining rapidly, raising concerns about liquidity and the operation of the linked exchange rate system [1][2]. - The HKD has strengthened due to net inflows of international capital, as non-US capital accelerates its return to Asia and emerging markets, increasing the allocation of HKD assets in global portfolios [2][3]. - The HKMA's intervention to maintain the HKD's strength has led to substantial liquidity injections, with the total injection exceeding HKD 100 billion by May 2025, resulting in a significant increase in the banking system's liquidity surplus [2][6]. Group 2: Interest Rate Trends - The structural decline in short-term HIBOR rates is attributed to the rapid increase in liquidity, with the 3-month HIBOR dropping below 2%, a decrease of over 200 basis points from earlier in the year [2][3]. - The low HIBOR environment is expected to support credit recovery and stabilize sensitive sectors like real estate and capital markets, providing short-term financial conditions conducive to economic recovery amid external uncertainties [7][10]. Group 3: Future Outlook - HIBOR is anticipated to gradually rise from its current low levels, although the pace will be more moderate compared to previous sharp fluctuations, with potential divergence from USD rates in the short term [10][11]. - The momentum for arbitrage trading has weakened, as the attractiveness of USD assets declines, and the HKD approaches the weak end of the peg, reducing the incentive for further depreciation [10][11]. - The HKMA has the capacity to absorb liquidity through various tools, which will play a crucial role in adjusting HIBOR levels, while the trajectory of USD interest rates remains a key variable influencing HIBOR's future direction [10][11].

Core Viewpoint - The current Hong Kong dollar deposit rates are significantly lower than the US dollar time deposit rates, with most banks offering over 3% for USD deposits compared to around 1% for HKD deposits [1][19]. Group 1: Interest Rate Trends - As of June 17-18, the 1-month HIBOR has further decreased to around 0.5%, and the HKD exchange rate has approached the 7.85 "weak side guarantee" level without intervention from the Hong Kong Monetary Authority (HKMA) [3][15]. - The HKMA has released a substantial amount of liquidity, leading to a continuous decline in HIBOR and consequently pushing down HKD deposit rates significantly [6][19]. - The HKD time deposit rates at major banks have dropped to as low as 1%, while USD time deposit rates remain above 3% [19][20]. Group 2: Currency Exchange Dynamics - The HKD has depreciated against the USD due to a widening interest rate differential, with the 3-month interbank rates showing a spread of over 300 basis points [5][12]. - The HKD liquidity has become very ample following the HKMA's actions, which has led to a decrease in short-term interest rates and a widening gap between HKD and USD rates [12][13]. - The HKD exchange rate has moved from 7.75 to 7.85, indicating a shift towards the weak side of the peg [14][17]. Group 3: Economic Implications - Lower interest rates are seen as beneficial for the overall economic environment in Hong Kong from a macroeconomic perspective [21]. - The current low interest rate environment may not be sustainable due to various factors affecting the supply and demand for HKD, which could lead to potential increases in rates in the future [22].

Group 1 - The Mortgage Market Index (MMI) for May reported a significant drop to 2.8%, a decrease of 74 basis points, marking a 31-month low [1] - Over 95% of new mortgage clients opted for the H mortgage plan in May, influenced by the Hong Kong Monetary Authority's market interventions, which increased the banking system's surplus to HKD 174 billion [1] - The average one-month HIBOR fell sharply to 1.47% in May from 3.65% in April, contributing to the decline in MMI and easing the mortgage burden for property buyers in Hong Kong [1] Group 2 - The latest U.S. Consumer Price Index (CPI) for May was reported at 2.4%, slightly up from 2.3% in April, while the unemployment rate remained stable at 4.2% [2] - The impact of tariffs on inflation is still under observation, leading to expectations that the Federal Reserve will maintain its current interest rates for the time being [2] - There is a belief that if inflation remains manageable, there may be one opportunity for a rate cut in the second half of the year [2]

Investment Rating - The report maintains a "Buy" rating for BOCHK Holdings (2388 HK) despite the decline in HIBOR, indicating resilience in the stock [2]. Core Insights - HIBOR is at a three-year low, raising questions about its implications for the Hong Kong stock market. Strong local liquidity is supporting the market, even with rising HIBOR [1][4]. - The real estate market is expected to gain more support due to low HIBOR, while local banks may face declining net interest margins and slower income growth [4]. Summary by Sections HIBOR and Market Impact - HIBOR's decline is a significant factor influencing investor sentiment and market dynamics in Hong Kong [1][4]. - The report discusses the implications of HIBOR fluctuations on the stock market, local banks, and the real estate sector [4]. Company Ratings - BOCHK Holdings (2388 HK) is rated as a "Buy" due to its resilience despite the declining HIBOR [2]. - Sino Land (83 HK) has been downgraded to "Hold" due to increasing profit pressures [2]. Real Estate Market - The report highlights the growing resilience of the Hong Kong real estate market, suggesting a more stable foundation moving forward [2][4].