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Hong Kong Interest Rates May Rise Ahead of U.S., Tsang Says

Hong Kong’s interest rates may increase ahead of gains in the U.S., as an outflow of funds would lead banks to raise rates, said Financial Secretary John Tsang.

Expectations of rising interest rates “could gradually affect” the city’s property market, Tsang told reporters today.

Federal Reserve Chairman Ben S. Bernanke this week said policy makers may “moderate” their pace of bond purchases this year, reducing money being pumped into the U.S. economy, some of which 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.

“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,” Tsang said today. “There’s no massive outflows for now.”

Hong Kong stocks fell for the sixth week, the longest losing streak since October 2008, amid a credit crunch for Chinese banks and concern about the reduction in stimulus.

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 unveiled a slew 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.”

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