Cailian Press, December 20th (Reporter Cao Yunyi) The US dollar wealth management market has remained active this year. However, with the Federal Reserve starting a rate cut cycle, the future yields of US dollar wealth management products and the performance benchmark for newly issued products may decline. HSBC Hong Kong has today lowered the annual interest rate on US dollar savings accounts by 12.5 basis points to 0.375%. In addition, HANG SENG BANK also recently reduced the fixed deposit rate for US dollar products, but there is still an interest rate spread advantage compared to RMB products.

Industry insiders pointed out that the turning point for the popularity of personal USD products will depend on the persistence of the Federal Reserve's interest rate cuts and changes in market confidence towards USD assets. The USD deposit interest rates will face adjustments, which will directly impact USD MMF products that invest in USD deposits, putting downward pressure on yields. However, if the pace of rate cuts by the Federal Reserve slows down next year, the turning point is likely to be delayed.

Yields on USD products remain relatively high during the interest rate cut cycle.

After the Federal Reserve cut interest rates again, some Financial Institutions subsequently lowered the interest rates on USD products. HSBC Hong Kong announced a decrease of 12.5 basis points to an annual interest rate of 0.375% on USD savings accounts starting today. Today, a Caijing News reporter also learned from HANG SENG BANK that the bank's USD fixed deposit product interest rates were recently reduced, with 3-month, 6-month, and 1-year fixed deposit preferential rates dropped to 4.3%, 4.1%, and 4.0% respectively.

However, against the backdrop of interest rate cuts, the popularity of personal USD products has not diminished. Since December, several Banks' wealth management subsidiaries have been intensively launching new USD MMF products, and the yields are significantly more attractive compared to RMB products. In December, Bank of China Wealth Management and Agricultural Bank of China Wealth Management both launched fixed income USD MMF products, with performance benchmarks of 3.9%-4.7% and 3%-4% respectively.

According to Puyiyuan data, as of December 9, the total number of active USD MMF products is 1,312, with a total scale reaching 281.927 billion yuan, doubling from the 140.351 billion yuan at the end of last December. Among these, the "Global Tianyi USD MMF Product 3 - Hui" launched by Industrial Bank Wealth Management has an annualized yield of 5.15% since its establishment, with a performance benchmark of 4.8%, classified as R1 low-risk type, with a minimum purchase amount of 1 USD, automatically maturing after 368 days. A fixed income USD closed-end wealth management product launched by Bank of China Wealth Management on December 5 has a term of 96 days, with a performance benchmark of 3.9% to 4.7%, primarily allocating the raised foreign currency funds to domestic and foreign currency markets.

Data from Xingyin Wealth Management shows that as of December 6, the total balance of foreign currency and cross-border wealth management products has exceeded 30 billion yuan in RMB equivalent, doubling compared to the end of last year. The newly launched Huili Stable Three-Month Closed-End Product has a performance benchmark between 4.2% and 4.3%.

In the context of the Federal Reserve's interest rate cuts, individual USD products still have a spread advantage over RMB products. This trend is influenced by multiple factors including the global market economic environment, changes in interest rates, and the movement of the USD. The appeal of dollar wealth management products remains in the short term. Senior Analyst Ai Yawen from Rong360 Digital Technology Research Institute stated to a reporter from Caixin.

USD deposit products also attract investors with relatively high yields, with most products still maintaining rates above 4%. The capital bank's USD fixed deposit rates for 3 months, 6 months, and 12 months are 4.3%, 4%, and 3.7%, respectively; Bank Of Jiangsu's 'Enjoying Treasure' foreign currency deposit product requires a minimum deposit of $2,000, with fixed rates for 1 month, 3 months, 6 months, and 1 year being 4.35%, 4.2%, 4.1%, and 4.1%, respectively.

Tian Lihui, director of the Financial Development Research Institute at Nankai University, stated that the high enthusiasm for USD wealth management and USD deposits during the Federal Reserve's rate cut cycle is primarily due to expectations of a strong USD exchange rate. If the market expects the USD to appreciate or remain stable, then even with falling interest rates, holding USD assets can yield potential gains from exchange rate appreciation.

Is there a turning point for individual USD products?

However, as the magnitude of interest rate cuts increases, the yield advantage of USD products may weaken. Analyst Zhang Jing from Huabao Securities also believes that with the start of the Federal Reserve's rate cut, USD deposit rates will face adjustments, which will directly impact USD wealth management products and will be under pressure from falling yields.

Puyi Standard pointed out in a research report that the outstanding performance of USD fixed income products is mainly due to the Federal Reserve's monetary policy, the economic recovery process, and support from global market liquidity. USD assets still have investment appeal in the short term. However, the complexity of the global economy, such as the interest rate hike cycle, geopolitical risks, and potential market adjustments, may impact the future yields of USD fixed income products.

In recent months, the volatility of the USD has significantly increased, and the USD has also been fluctuating at high levels. Investors need to guard against the risk of USD exchange rate fluctuations. Zhou Maohua, a macro researcher from China Everbright Bank's financial markets department, stated.

With global market interest rates generally declining and sluggish economic growth leading to relatively high appeal of USD assets, the arrival of a turning point will depend on the sustainability of the Federal Reserve’s rate cuts and changes in market confidence towards USD assets. If the pace of the Federal Reserve's rate cuts slows down next year, the turning point will likely be delayed.

Aiyawen suggests that investors should comprehensively consider Exchange Rates risk, interest rate risk, and personal funding needs. The Federal Reserve's interest rate cuts may lead to a depreciation of the USD, increasing exchange risk. At the same time, investors should pay attention to the changes in the US-China interest rate differential, as this will directly affect the yield of USD products. For investors who have a need for USD asset allocation or may need to use USD in the future, USD wealth management products can serve as tools for diversifying risk and obtaining additional returns.