Hong Kong Funding Cost Seen Sliding on Fed Cuts, Slow Lending

The cost of overnight borrowing in Hong Kong could fall to about 3% by year-end, driven by expected interest-rate cuts by the Federal Reserve and weak loan demand, according to analysts.

DBS Bank forecasts the one-month Hong Kong Interbank Offered Rate to fall to about 2.5%, while Oversea-Chinese Banking Corp. sees it near 3%. The rate saw its sharpest rise in nearly three decades in the September quarter amid stock inflows and a rush of initial public offerings, before easing to 3.5% as fund demand slowed after Super Typhoon Ragasa hit the city last week.