Blockbuster IPOs buoy Hong Kong loans 17.1% in April

The city is hosting the back-to-back flotations of Xiaomi and China Tower.

Total loans and advances in Hong Kong maintained their strong momentum after rising 17.1% YoY in April, with loans for domestic use surging 19.4% YoY on the back of heated demand for IPO financing, according to OCBC Research. 

Hong Kong is hosting the back-to-back blockbuster IPOs of smartphone maker Xiaomi and mobile phone tower operator China Tower which could easily raise as much as $10b each in a win for the local bourse which earlier introduced sweeping reforms to its listing regime in its bid to challenge New York for the global IPO crown.

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Trade finance growth also clocked in 11.8% YoY thanks to strong external demand. HKD loan-to-deposit ratio hit a four year high after rising to 84.1% as loan growth continued to outpace deposit growth.

“We expect HKD loan-to-deposit ratio will remain elevated due to sanguine economic outlook. Adding that HIBOR will likely tick up gradually in the coming months, banks may continue to compete for deposits with higher interest rate,” added OCBC Research.

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Loans for use outside of Hong Kong, however, slowed down from 20.8% in November to 13.2% in April brought about by expectations of looser liquidity in the aftermath of the targeted RRR cut. OCBC expects that the volume of Mainland companies seeking overseas financing is expected to drop further as offshore funding costs rise and intensified scrutiny weighs in on loan demand.

Photo from The Ruester - Selfmade photography, Public Domain