| HONG KONG, Sept 3
HONG KONG, Sept 3 Banks in Hong Kong have
started to offer higher deposit rates to retain yuan funds ahead
of a likely cash squeeze in the run-up to a week-long holiday in
China in early October.
Already faced with a scarcity of yuan funds in the former
British colony due to stagnant growth in deposits and more
channels to invest offshore yuan in the mainland markets, the
upcoming holidays are only expected to worsen conditions.
The offshore yuan clearing bank, Bank of China Hong Kong
, said it had raised its preferential interest rate for
one-month new yuan funds above 20,000 yuan ($3,300) by 20 basis
points to 2 percent until Sept. 14.
The Hong Kong branch of Bank of Communications
is also offering a preferential deposit
rate of 3.4 percent for 6-month and 9-month yuan funds above 5
million yuan from Monday. For funds above 500,000 and 50,000
yuan, the rates are 3.2 and 3 percent, respectively.
The interest rates already surpass the onshore one-year
benchmark yuan deposit rate at 3 percent, which can be increased
by 30 basis points.
"Banks have learned the experience from the sharp rise of
money market rates last September, so they make preparations
earlier this year to meet fund needs toward quarter-end and
ahead of long holidays," said Raymond Yeung, an analyst at ANZ.
Last year, the overnight lending rate sought by some brokers
briefly jumped to as high as 7 percent at the end of September
as lenders were short of yuan funds.
China's National Day Holiday stretches from Oct. 1 to 7.
The offshore yuan deposit pool has stagnated and even shrunk
for two consecutive months as increased yuan repatriation via
programmes such as the Renminbi Qualified Foreign Institutional
Investor (RQFII) led to tighter liquidity.
Latest figures from the Hong Kong Monetary Authority showed
yuan deposits declined slightly to 695 billion yuan ($113.57
billion) in July.
Market analysts expect the total pool of yuan deposits to be
around 700 billion yuan at the end of 2013 compared with the
double-digit rates of growth in the past.
($1 = 6.1196 Chinese yuan)
(Reporting by Michelle Chen; Editing by Jacqueline Wong)