HONG KONG – The Hong Kong Monetary Authority on Thursday reduced its base interest rate to 5.25 percent, which is widely considered to be conducive to enhancing the city’s business environment and the business development of local enterprises.

The move came shortly after the US Federal Reserve that day lowered its target range for the federal funds rate by 50 basis points to between 4.75 percent to 5 percent.

Following the HKMA's announcement of lowering the basic interest rate from 5.75 percent to 5.25 percent, Hong Kong's Hang Seng Index rose on Thursday and Friday.

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Hong Kong’s Financial Secretary Paul Chan Mo-po said under the linked exchange rate system, with the reduction in US interest rates, there is room for the reduction of interest rate in Hong Kong, which will benefit the operation of local enterprises and have a positive impact on the asset market.

Wilson Wong, general manager of investment management of Bank of China (Hong Kong) Limited, was also confident about Hong Kong's financial markets. He pointed out that with the decline in the Hong Kong dollar loan-to-deposit ratio and abundant liquidity in the interbank market, Hong Kong interest rates are expected to remain stable in the quarterly and annual settlements.

As interest rates fall, borrowing costs will decrease.

Liu Mengji, co-head of Standard Chartered's Greater China and North Asia business and Hong Kong capital markets department, expected that the positive effects of rate cuts on Hong Kong's economy will begin to emerge early next year.

Lo Kam Wing, president of the Chinese Manufacturers' Association of Hong Kong, said that the depreciation of the Hong Kong dollar exchange rate along with the US dollar will help to increase the interest of foreign tourists to spend in Hong Kong.

The improvement of liquidity in the financial market and the reduction of financing costs will also help alleviate the capital costs of enterprises and the mortgage pressure on residents, which is beneficial for stimulating local consumption, added Lo.

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Sunny Tan, member of the Legislative Council, said that the interest rate cut will enhance the confidence of small and medium-sized enterprises in future development and investment, and will reduce the loan cost of SMEs.

Tan said that under the principle of "one country, two systems," Hong Kong has unique advantages such as a highly international business and investment environment.

He expressed his hope that the HKSAR government will continue to optimize policies and funding measures to support the development of SMEs to deal with global economic uncertainties.