Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 220

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 220
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 Hong Kong is a key area of concern. Markets continue to finance high public deficits, but debt sustainability remains a risk when set against a backdrop of more uncertain global growth prospects and a higher interest rate environment. Debt levels continue to rise in major markets as demands grow on government budgets from rising social welfare costs, defence and climate transition. We are monitoring the fiscal and market implications of recent government changes, including in the UK and the US, where election pledges are ambitious relative to already stretched fiscal positions. As global yields have increased, government bond prices have become increasingly sensitive to differences in growth and inflation expectations between markets, as well as the perception of fiscal and funding risks. A loss of investor confidence could drive a rise in yields, raise funding costs for governments and lead to tax increases and expenditure cuts that are negative for growth. For HSBC, the risks of a sharp rise in funding costs in our key markets relate both to the credit and refunding risks of our customers, market pricing risks of assets held for sale, and risks to net interest margins. We continue to monitor real estate conditions in mainland China and Hong Kong, where activity remains mixed. Various central government policies have been introduced to support the property market and wider economy, but meaningful signs of recovery are yet to be observed, with the exception of the residential real estate market in Hong Kong, which has seen some improvement in sentiment and transaction volumes in the fourth quarter of 2024. In Hong Kong, the high vacancy rate in the commercial real estate sector and the elevated interest rate environment have added downward pressure to the commercial real estate market. Commercial land sales resumed during the latter part of 2024 after a halt earlier in the year, and the recent reduction in interest rates has provided some liquidity relief to borrowers operating in this sector. Nevertheless, a sustainable recovery in underlying demand is yet to materialise, so the pressure on property prices may persist. We continue to closely monitor the risk of further credit deterioration and defaults in the portfolio. The Israel-Hamas conflict may resurge. While a 42-day ceasefire was agreed in January 2025, the durability of the ceasefire remains uncertain. The regional economic impact of this conflict was relatively limited throughout 2024. The US and UK imposed additional sanctions on Iran in 2024 in response to Iran’s activities and the increase in tensions between Israel and Iran. Further sanctions may be imposed and could increase the risk within our operations. While supply chains have largely adapted to the Russia-Ukraine war and the conflict in the Middle East, the disruption of key supply