In this week’s Hong Kong Edition, we examine what tumbling borrowing costs mean for the city’s moribund property market, take a first look at Cathay Pacific’s revamped airport lounge, and review the latest venture by the team behind Yardbird.

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Silver Lining

US Federal Reserve Chair Jerome Powell may not have delivered an interest-rate cut overnight, but Hong Kong is still seeing a rapid drop in borrowing costs. 

The one-month Hong Kong Interbank Offered Rate, or Hibor, has fallen sharply since April 29 from 4.07% to 2.09%, its lowest level since September 2022. (That’s the kind of easing President Donald Trump could get behind.) Given the rate is a reference for mortgage loans, the drop is a ray of light piercing the gloom surrounding the housing market, where prices are down 29% from their 2021 peak. 

The sort-of savior in this tale is the Hong Kong Monetary Authority, which has been intervening to stop the Hong Kong dollar from strengthening past the strong end of its trading band. By selling the local currency — sales total HK$129.4 billion ($16.7 billion) at last count — the HKMA is adding to interbank liquidity and helping  drive down borrowing costs.

Yet the HKMA is just following the mechanism backing the peg, known as the Linked Exchange Rate System, and responding to a surge in demand for Hong Kong dollars. So why the increased demand? This is where the story gets a little murkier. 

A primary driver is likely the upcoming listing of EV battery giant CATL. The Chinese company could raise about $5 billion in an offering this month, Bloomberg has reported, making it one of the city’s biggest share sales in years. China’s Chery Automobile is also planning a large IPO. 

Indeed, the last time the HKMA defended the strong end of the peg, in late 2020, the never-to-happen IPO by Ant Group was sucking up capital from around the world.

It’s been a boom year so far for deals. Some $3 billion has been raised via IPOs and secondary listings this year, triple the amount a year earlier. The city’s stock market has also been outperforming recently, with the Hang Seng Index surging 14% in the past month, helping increase market capitalization by $539 billion. Dividend payments by Chinese firms, projected at $36 billion this quarter, are another source of demand.

The Hong Kong dollar may continue to appreciate in coming months, HKMA Chief Executive Eddie Yue told lawmakers this week, adding that its direction will be influenced by upcoming IPOs and the carry trade — where traders borrow in a lower-yielding currency to buy a higher-yielding one.

More controversially, the spike in the Hong Kong dollar has coincided with tumbling confidence in the primacy of the US dollar, and some wild moves in other Asian exchange rates. Taiwan’s dollar surged 5% on Monday, the most since 1988. Hong Kong could be buffeted by other unusual flows if US dollar holdings unwind across the region.

“With the fading of the US exceptionalism view and considering the market narrative of de-dollarisation, Hong Kong dollar strength will likely sustain for longer in 2025,” ANZ Banking Group’s Raymond Yeung and Khoon Goh wrote in a Wednesday note. “The influx of capital into the Hong Kong market seems to be structural and is only in the early stages.”

Either way, this all suggests more HKMA interventions, and greater interbank liquidity. And that may just be the kickstart the city’s moribund property market needs at a time when data is still flashing red.

The number of households in negative equity, where their properties are worth less than the loans backing the purchase, is the highest since 2003, with 40,741 underwater. Compounding the pressure, the stock of unsold new homes has risen to a record 28,000 — with a further 77,000 units expected to be completed in the next three to four years. At the same time, demand for borrowing has continued to weaken, with the loan-to-deposit ratio of Hong Kong’s banks falling toward 70%.

The market has a long way to go before showing a recovery. While the value of residential real estate sales rose by about 9% to HK$42 billion in April from March, that’s down 46% from a year earlier, according to the Land Registry. 

Making predictions in the current environment is a risky strategy. Still, for now, the picture is brighter for the housing market than it was just a week ago. —Richard Frost

A Preview of Cathay Pacific’s New Lounge

I joined a press junket on Wednesday to view the reopening of Cathay Pacific's Bridge lounge at the airport, four years after its abrupt closure during Covid. In place of the cool marble design is an earthy look using wooden materials in the 2,700-square-meter space that was sketched out by British designer Ilse Crawford, known for her work on Soho House in New York and London, as well as Duddell’s in Hong Kong.

Cathay Pacific’s Bridge lounge at Hong Kong International Airport. Photographer: Lam Yik/Bloomberg

Among the notable features of the 523-passenger capacity lounge are an 18-meter-long bar with freeflow Champagne and dining areas offering both Chinese and international cuisine. Facilities include nine showers. There’s also an (even more) exclusive area reserved for first-class passengers and diamond-tier members with up to 100 seats.

The new Bridge is part of a revamp by Cathay Pacific of its lounges in Hong Kong and elsewhere that will last until 2027. The carrier is seeking to compete with rivals such as Singapore Airlines, which has earmarked S$45 million ($35 million) to upgrading lounges.

The overhaul comes as Cathay Pacific’s profit inched higher in 2024 despite expectations for a drop, and flight capacity reached pre-pandemic levels. —Danny Lee

Chart of the Week

Heeding the advice to “buy when there’s blood in the streets” — usually attributed to Baron Nathan Rothschild — would have paid dividends in Hong Kong’s stock market recently.

A month after panic selling drove the Hang Seng Index down 13% in its biggest plunge since 1997, the benchmark has recouped all its losses. Back then, investors were freaking out over escalating tariffs between the US and China. But as Hong Kong Edition pointed out a couple of weeks ago, Beijing holds the upper hand when it comes to the trade war. While the chances of a resolution remain uncertain, investors are — rightly or wrongly — more optimistic about a positive outcome.

The Review: Yardbird’s Newest Outing

The team behind perennial favorite Yardbird is back with a new izakaya called Always Joy following the closure of the group’s snack bar Ronin. 

The focus is on using fresh, daily ingredients in a menu of shared plates that are always changing. Like Ronin, there’s an emphasis on contemporary Japanese cuisine, but this latest iteration also has a confident dose of Cantonese influences and a more experimental mix. 

Yardbird’s new outing, Always Joy. Source: Always Joy

The menu is relatively constrained — though the range of dishes stretching across so many flavors and textures can seem a little dizzying. Plus we were greedy about wanting to try different things. Any indecision you might have is offset by the staff, who have an infectious enthusiasm for their food and mission. We were offered half portions of dishes we wanted to taste but weren’t sure we had room for (not an option outlined on the menu), while reminiscing about the restaurant group’s long-shuttered sandwich shop. 

The drinks menu here is perfection, and the bartenders and servers clearly understand their beverages. Cocktails are on the more herbal, citrus and drier side. My guest tried and loved the Ume Hi, with Yardbird Umeshu, and the Fuji Rock with Roku Gin, Daiyame Shochu, Baldoria Bianco and Fernet Granit. There’s also a nice set of non-alcoholic options. 

Our meal for two totaled HK$2,003 ($258) for six small plates (including a couple of half portions), three large plates, one dessert, two cocktails and a mocktail. Some advice on dessert (there’s only one offered): Don’t skip it. 

Daily sashimi. Photographer: Rebecca Choong Wilkins/Bloomberg

The vibe: Unsurprisingly ultra cool, much like its sister Yardbird but with one major improvement — none of the clattering acoustics. I have no idea what they’ve done to fix the sound design here, but it works to create a laidback coziness that distinguishes the atmosphere from its noisier sister restaurant. It’s the place to go for a conversation you actually want to hear.  

Can you conduct a meeting here? Yes, there’s booth seating and sufficient space between the tables for private discussions, but you’ll be missing out on the main focal point of the restaurant: its open kitchen. Always Joy has a stunning stainless steel kitchen running nearly the length of the restaurant — opt for a seat at what must be one of the city’s longest chef’s tables to soak up the passion and energy of this place. 

How’s the food: Modern, with lots of umami flavors. The daily sashimi (we had uni, swordfish and seabream) came as seasoned bites with no extra soy sauce needed. The cucumber flower tempura was sweet, light and moreish, and the cauliflower salad cashews and pickled onion were a delicious surprise. 

My guest loved the threadfin bream with pickled cabbage, and the savory-sweet pumpkin mochi with soy brown butter and sage was delicious. Longtime fans of the Yardbird owners’ projects will know the lore of having a daily sandwich on the menu.  

Threadfin bream with pickled cabbage. Source: Always Joy

To finish, the dessert encapsulates the best of what Always Joy offers: a dish of fresh, balanced flavors. The strawberry sundae with soba granola and red shiso is a must. Get your own. I still regret opting to share. 

A tip on ordering: I didn’t find the menu lent itself to intuitively ordering a complementary set of plates. Some of our dishes seemed slightly odd neighbors — salad with a creamy dressing next to citrus-leaning sashimi alongside a smoked sardine eggplant sandwich — all of which were on the small plates selection. Lean on your servers to help curate a mix that make sense together. 

Need to know: Always Joy is on the ground floor of 148 Wing Lok Street in Sheung Wan, just down the road from Yardbird. You can book a table here. It’s open Tuesday to Saturday, from 6 p.m. to midnight.  —Rebecca Choong Wilkins

Read more reviews of Japanese-inspired restaurants in Hong Kong: Honjo, Citrino da Yoshinaga Jinbo and Ando.

Photo of the Week

Here’s What Else Is In the News

• Trump says he won’t lower China tariffs to jump-start talks
• Xi arrives in Moscow after Russia, Ukraine trade attacks
• Hong Kong works on image overhaul to attract overseas visitors
• Trump says he’ll raise Jimmy Lai in China trade talks

Coming Up

Join us at Bloomberg New Voices’ cocktail event on May 13 at Asia Society, including interviews with Amy Lo at UBS and Christina Au-Yeung at Morgan Stanley. Register here.

• May 10:  Mariah Carey: Celebration of Mimi Shenzhen
• May 21-June 22: Cirque du Soleil Kooza
• May 22-25: Affordable Art Fair
• May 30: Manchester United vs Hong Kong, China
• May 30-June 8: Hong Kong Ballet: Giselle
• May 31: Stanley International Dragon Boat Championships
• May 31-June 1: Hong Kong Whisky Festival 
• June 2: Book talk with Andrew Mertha on the Khmer Rouge
• June 11: Bloomberg Invest
• June 14: Jimmy O. Yang Live in Hong Kong 
• June 20-29: Extravaganza! When Brazil Meets Hong Kong
• July 26: AC Milan vs Liverpool
• July 31: Tottenham vs Arsenal

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