Benchmark Reform: HONIA Beckons but is Hong Kong Ready?

TMA published feedback from market participants on HONIA as the successor to HIBOR in late December but unlike its US counterpart SOFR, Asian businesses are taking time to adapt.

The imminent demise of the London Interbank Offered Rate (LIBOR) in the next two years may have sparked a sense of urgency in the US and Europe but in Asia the alternative reference rate regime is far from clear.

Amid the push for a post-IBOR world, certain jurisdictions still seem to be dragging their feet, opting to retain their existing regime while at the same time introducing an alternative reference rate.

Two chairs

Hong Kong has not yet scheduled a date for the retirement of the dominant HIBOR even as local market body, the Treasury Markets Association, has endorsed the Hong Kong Dollar Overnight Index Average, or HONIA as a legitimate alternative.

The TMA has conceived the HONIA as a “reference rate of Hong Kong dollar unsecured lending transactions in the Hong Kong interbank market, executed through the panel of [five] contributing brokers”.

Green shoots of demand for products linked to the HONIA have sprouted over the past year. In October 2019 a landmark HONIA transaction was completed in an effort helmed by broker Tradition (Asia), one of the five firms whose contributions form the basis for the calculation of the HONIA.

But in terms of deal flow since that swap … [read more]

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