Public Investment Fund Insights: HKMA CEO Discusses Interest Rates and Bad Debts
Public Investment Fund Opportunities Amid Rising Bad Debts
Soured loans in Hong Kong’s banking system have risen, but the situation is still manageable and will likely improve because of the recent stock market rally and emerging opportunities from the Middle East, the Hong Kong Monetary Authority’s (HKMA) CEO said.
Legislative Council Concerns and Stock Market Reactions
Several lawmakers expressed worry on Monday about an increase in the banking sector’s bad-debt ratio to 1.89 percent in June from 1.5 percent at the end of 2023. But Eddie Yue Wai-man had a more positive take on the situation. The default rate for the Special 100 per cent Loan Guarantee Scheme, a lending program to support small- and medium-sized enterprises (SMEs) during the Covid-19 pandemic, jumped to 10.25 percent as of the end of September from 5.49 percent a year earlier.
Stimulus Measures and Economic Outlook
“The recent stock market rally may have the wealth effect that people who gain from the stock market will go shopping and dining, while China’s stimulus measures also support the economy,” Yue said in a meeting with members of the Legislative Council. Saudi Arabia offers new opportunities for Hong Kong-based SMEs to expand in its market.
- Markets in Hong Kong have rallied since the US Federal Reserve cut its benchmark rate on September 18.
- Yue stated the bad debt situation is manageable due to strong capital adequacy ratios.
- The government estimates the default ratio could rise as high as 25 percent under the guarantee scheme.
Digital Transformation for SMEs
Yue added that the HKMA has been collaborating with banks to help SMEs ramp up their digital capabilities. “SMEs need to upgrade to meet changing market demands,” he asserted.
Investment Fund with Saudi Arabia
On the Middle Eastern front, Saudi Arabia’s sovereign wealth fund and the HKMA recently agreed to establish a new investment fund targeting US$1 billion to support Hong Kong-based SMEs and expansion into Saudi markets.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.