On Friday HSBC announced that it was cutting its Hong Kong dollars savings rate to 0.001%. Where cash used to be king, it is now earning a pittance. Indeed, those people who leave their money under the mattress are scarcely any worse off than those that keep it in the bank in Hong Kong.
The more high net worth - ie those with more than HK$1 million on deposit - do benefit from a bonus interest rate, but at 0.005%, it isn't much of a bonus to be frank.
The fact of the matter is that HSBC's cut is more psychological than anything else. Its previous savings rate was 0.01%, which was already pretty dismal from the saver's perspective.
But by slashing the rate still further, the territory's biggest bank is sending out a bold signal - buy equities. Indeed, if the taxi drivers of Hong Kong can't get any returns on their cash, what option do they have but to stick it in the market, especially as that market is going up?
This equity rally has been driven by liquidity thus far, and now with the territory's biggest bank cutting the savings rate to the lowest level in history, it may just have got even more liquid.
From HSBC's perspective this will be no bad thing. The bank will be happy if it cannibalises its deposit base since most customers will buy the stocks through its online portal - and the broking commission will be better for the bottom line than the surplus of deposits it currently holds in Hong Kong.
