Company: HBCYF
Filing Date: 2025-10-28
Form Type: 6-K
Source: 0001089113-25-000056
Chunk: 39

Company: HSBC HOLDINGS PLC
Filing Date: 2025-10-28
Form: 6-K
Chunk 39
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 have seen significant valuation gains, including in the artificial intelligence (‘AI’) and technology sectors. AI and the surge in related investment may lead to future gains to productivity and growth, but current high valuations raise the risk of a disruptive correction that could impact economic growth, which may in turn have an adverse effect on HSBC’s risk profile and earnings. We also remain subject to interest rate risk, which can affect net interest income, the fair value of our assets and liabilities, and overall financial performance. In Hong Kong, our operations have been and continue to be exposed to fluctuations in HIBOR, which has experienced heightened volatility due to changing corporate cash demands and changing investor risk appetite. Major central banks have adjusted their policy approach in response to changing inflation and employment risks. The US Federal Reserve resumed its cycle of interest rate cuts in September 2025, after it assessed tariff-related inflation risks as transitory but labour market risks as having increased. The target range for the Federal Funds rate is now 4%–4.25% with markets anticipating further cuts before the year-end. In the UK, the Bank of England has expressed increasing concern about the inflation outlook and has signalled its intention to pause further interest rate cuts over the remainder of 2025. Although financial markets have priced in further interest rate cuts, there is uncertainty around their future trajectory. Policy rates could be raised if inflation were to accelerate significantly beyond central bank target ranges. Higher interest rates may reduce loan demand across key consumer and business segments, which could lead to a deterioration in credit quality and weigh on real estate and other asset prices. By contrast, lower interest rates could pressure net interest margins and adversely affect profitability. Our risk profile may be influenced by fiscal policies, public deficits and levels of indebtedness. In several developed markets, government debt levels are rising due to rising social welfare costs and increased expenditure on defence and climate transition. A fragmented political landscape in many markets has diminished the political will for fiscal tightening. Rising long-term interest rates across major economies could adversely impact the fiscal capacity and debt sustainability of highly-indebted sovereigns. The rise in funding costs in our key markets could reduce the potential for GDP growth by raising the cost of borrowing while also creating refinancing risks for our customers and counterparties. Exchange rate volatility may also affect our risk exposure through mark-to-market changes in trading positions and the translation effects of currency movements. The geopolitical environment remains complex, and tensions could impact the Group’s operations and risk profile. We continue to monitor the ongoing Russia-Ukraine war and