Hong Kong can look forward to a more healthy domestic economy, as the gradual decrease of interest rates, the central government’s economic support measures, and the wealth effect brought by the booming stock market gradually exert a positive impact, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue Wai-man has said.

But some industries have come under pressure since domestic consumption patterns have changed in the wake of the COVID-19 pandemic.

During the briefing to the Legislative Council’s Financial Affairs Panel on Monday, the HKMA chief disclosed that the default rate of 100 percent Personal Loan Guarantee Scheme (PLGS) in October increased to 10.3 percent.

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In delivering the 2021-22 Budget, the government of Hong Kong Special Administrative Region announced the launch of the PLGS and subsequently announced enhancement measures, in a bid to provide a source of financing to individuals. The government provides a 100 percent guarantee for concessionary low-interest loans taken out by eligible borrowers.

“It is expected that the default rate will gradually increase, but the risk is still controllable. As interest rates gradually lower, or when the Chinese mainland’s economic stimulus policies become effective so that mainland tourists and Hong Kong residents become more willing to spend, we expect the increase in the default rate will be slower,” Yue said.

Turning to the property market, the number of negative equity cases in Hong Kong exceeded 40,000 as at end-September. “Due to the further decline in property prices from May to September, the number of negative equity cases has increased again, but the current delinquency rate of mortgage loans is still low at 0.13 percent and the situation is considered controllable,” Yue argued.

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The HKMA chief executive added that interest rate is not the only factor affecting the development of the property market when other important factors include housing supply and demand will also affect the property market. “The public should carefully consider and manage risks when making home purchase mortgage or other borrowing decisions.”

Turning to financial infrastructure, Yue said the policy of introducing a renminbi trading counter in the Southbound Stock Connect has "been given the green light".

“Mainland financial regulators and the Hong Kong Stock Exchange are undergoing technical docking which will take some time. We hope the new measure can be implemented as soon as possible which will help increase market liquidity. At the same time, we also have to develop risk management tools such as the Swap Connect and the proposed trading of government bond futures so that investors can invest with confidence,” Yue said.