UPDATE: Hong Kong Banks Keep Prime Rates Steady As HKMA Stands Pat

Hong Kong's major commercial banks left their prime lending rates unchanged Wednesday, after the U.S. Federal Reserve and Hong Kong's de-facto central bank kept their benchmark interest rates steady.

HSBC Holdings PLC (HBC) units Hongkong & Shanghai Banking Corp. and Hang Seng Bank Ltd. (0011.HK) left their prime rates unchanged at 5.00%. BOC (Hong Kong) Ltd. (2388.HK) also left its rate at 5.00%.

The three banks haven't changed their prime rates since November 2008, and their decisions Wednesday were widely expected. Analysts said they expect the low interest environment to continue for another year, which could contribute to asset price inflation in the city.

Earlier Wednesday, the Hong Kong Monetary Authority said it kept its base rate unchanged at 0.50%, in line with the U.S. Federal Open Market Committee's decision overnight to keep its policy rate steady.

The territory's currency peg to the U.S. dollar bolts Hong Kong's monetary policy to that of the U.S., so the HKMA generally follows in lockstep any interest rate adjustments by the Federal Reserve.

"I expect the current prime rate level won't change until the fourth quarter next year, given the U.S. rate outlook and slow economic recovery in the U.S, which could contribute to asset price inflation in the city," said Brian Tsang, head of treasuries at Chong Hing Bank.

Separately, the HKMA said in its quarterly report Wednesday the risk of overheating in the city's booming property market remains a concern, as capital inflows into Asia are likely to continue amid the divergence in growth rates between East Asia and developed economies.

The city's property prices are near the peak before the 1997 Asian financial crisis, with average home prices rising 15% in the nine months ended Sept. 30, following a 30% jump in 2009.

-By Chester Yung and Fiona Law, Dow Jones Newswires; 852-2832 2331; chester.yung@dowjones.com

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