Hong Kong Follows Fed With Hike in Threat to Property Boom

Hong Kong's de facto central bank followed the Federal Reserve and boosted interest rates for 3rd time since December, elevating the risk of a selloff in the world's priciest housing market.

The Hong Kong Monetary Authority boosted borrowing costs by 25 basis points to 1.5% after the Fed raised its target range by the same amount. The move registered swiftly in markets, with the city's 1-month interbank rate, known Hibor, jumping the most in 6 months, and a gauge of property stocks in Hong Kong retreating more than 1%.

While the city effectively imports U.S. monetary policy due to its currency peg, local banks have been reluctant to pass on higher rates to customers amid fierce competition for mortgages -- heightening a property boom as well as fueling depreciation in the Hong Kong dollar. The premium on Libor -- the one-month U.S. interbank rate -- over Hong Kong’s Hibor rate swelled to 79 basis points on Wednesday, the most since November 2008.

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Source : 
1) www.bloomberg.com