LEO Lo, co-founder of a Hong Kong apparel maker whose customers have included Baby Dior, said he was surprised when five senior bankers visited his office this year in an industrial district of Kowloon in Hong Kong offering to buy lunch.
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Last year, companies such as his had to chase after the banks, only got access to lower-level executives, and meals usually went on clients' tabs, Lo said. Now, lenders are pursuing him to offer loans, trade settlement, hedging and investment opportunities in the yuan as they vie for a bigger piece of Hong Kong's expanding market for the Chinese currency.
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As the world's second-largest economy uses Hong Kong as a testing ground for currency convertibility by allowing banks to offer limited services in yuan, lenders are stepping up competition for that business. Apart from courting companies, they're raising interest rates to draw depositors, hiring staff, holding investor roadshows, boosting underwriting of bonds, increasing lending and creating investment products.
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Their increasingly fierce rivalry, coupled with a low interest-rate environment, has meant slowing profit expansion at banks operating in Hong Kong. That makes finding new revenue streams critical to maintaining growth.
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Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia, cut his yuan-gain projection in July to 6.30 per dollar by the end of this year from 6.07. Ji's estimates were the most accurate over the last six quarters, according to Bloomberg Rankings. Its current value of 6.35 to the US dollar is down almost 1 percent this year, the most since the yuan was allowed to fluctuate within a narrow range in July 2005. It appreciated 4.7 percent last year.
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To attract yuan savings, HSBC raised the cap of its preferential interest rate on three-month yuan deposits four times in the first half of the year to 3 percent from 1.1 percent, according to Yvonne Chuang, a Hong Kong-based spokeswoman. Standard Chartered increased the three-month rate three times to 2.5 percent, Li said.
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LEO Lo, co-founder of a Hong Kong apparel maker whose customers have included Baby Dior, said he was surprised when five senior bankers visited his office this year in an industrial district of Kowloon in Hong Kong offering to buy lunch.
