from 1.69% at beginning Nov-11, but remained above the 1.38% at end
of Sep-11. STAN and WHB retreated the most. HSBC’s and BOCHK’s
offers are the highest at 1.88% and 1.85% for 2- and 1-month time
deposit, respectively. HIBOR moved up by 3bp in the last month.
 Drivers of falling deposit rates: Liquidity is seasonally tight in 4Q, as
banks prepare year-end financial reporting and compliance with
HKMA’s liquidity ratio requirement, as well as preparing for the
liquidity needed for Chinese New Year. In December, banks generally
finish their liquidity preparation and thus deposit competition started to
slow down.
 1Q12 expectations: Liquidity is seasonally better in 1Q compared with
4Q, mainly due to liquidity repatriating after Chinese New Year.
Combined with potential front-loading of China loan growth, Chinarelated
loan demand in Hong Kong could fall. Therefore, we expect
competition to shift from deposits (lower deposit rates) to loans (lower
lending rates) in 1Q12.
 2012 expectations: Based on our house view of Rmb8.2 trillion loan
quota in China (2011: Rmb7.6 trillion) and RMB appreciation
expectations (6.0 by Dec-12), we expect China-related loan demand
could return to Hong Kong, and cross-border business could revive
towards 2H12. Competition could again shift from loans to deposits,
depending on the pace of China easing.