(Yicai) March 4 -- Industry insiders have cautioned Chinese mainland-based investors about foreign exchange risks as they rush to open new US dollar deposit accounts in Hong Kong with interest rates as high as 10 percent through the cross-border Wealth Connect in the Greater Bay Area.

These high-rate accounts are unusual and the forex risks need to be kept in mind, according to the insiders. The US Federal Reserve is expected to cut interest rates this year, so exchange rate fluctuations may impact returns, they said.

Since the Wealth Management Connect was revamped on Feb. 26, the Hong Kong branches of international banks have been offering US dollar deposit products carrying interest rates of up to 10 percent. These have drawn considerable investor interest at a time when rates on the mainland are falling.

At Industrial and Commercial Bank of China Asia eligible clients can enjoy high annual rates by opening one-month or three-month deposit accounts through the southbound leg of the Wealth Connect before the end of this month. For deposits of USD1,000 or above, the one-month rate is 10 percent. The lender’s one-month yuan deposits pay 6 percent, while its Hong Kong dollar deposits pay 9 percent.

Besides ICBC Asia, other Hong Kong branches of banks such as Singapore-headquartered OCBC Bank, London-based Standard Chartered, and Beijing-based Bank of China, have launched short-term deposit products offering 6 percent to 10 percent.

But participation requires quick action and caution. Yicai learned from client managers at several banks that the products are mostly part of short-term campaigns aimed at attracting customers.

“These products essentially represent short-term discounts by banks,” a marketing staffer at a foreign bank said. Products with high interest rates typically only last for one to three months, and can only be bought once, the person added.

The Wealth Connect has restrictions on clients. “You need to meet the social security requirements, have financial assets of CNY2 million (USD278,000), or provide proof of income in excess of CNY400,000 (USD56,000) over the past three years with a company seal,” a customer relations manager at the Dongguan branch of China Merchants Bank told Yicai.  

Editor: Emmi Laine