USD Cash Management in HK

[LoganH]

I fail to understand why those in HK seeking super-low-risk investments (US treasuries or ~equivalents) would purchase HKD time deposits versus USD time deposits. If someone needs to spend the HKD within 3 months, then okay keep that soon to be spent HKD in HKD. However, I don't get it for money that has a 99+% of not being needed for a year or more (thus should be invested).

Best 3-month time deposit offers I can see (23 Feb 2025):
Hang Seng:
HKD: 3.1%
USD: 3.8%

HSBC:
HKD: 3.2% (3.0% for lowly folks like me that have 0 status at HSBC)
USD: 3.7% (3.5% for 0 status plebs)

DBS:
HKD: 3.25%
USD: 3.9%

Bank of India (HK):
HKD: 3.5%
USD: 4.75% (not a recommendation as I'm going to assume they have some serious hoops to jump through)

And the list goes on and on, but the point is I can't understand the basis for a 50-125 basis points difference between HKD & USD time deposits. 1USD=7.75 to 7.85HKD, which equals a maximum difference of ~127 basis points.

Why don't more people in HK that purchase HKD time deposits instead convert their HKD to USD and earn higher rates for USD time deposits?

If you want to do such things, I recommend using Hang Seng's or HSBC's 1 week conversion time deposit offers, but make sure to jump through all their hoops to reduce currency conversion costs (if you care about such costs).
Or yeah you can use IBKR to convert HKD to USD, but make sure not to trip yourself up according to whatever has tripped people up according to some previous posts on geo.
If you have a Schwab US brokerage account, just send their Citibank HK (N.A.) account your HKD, and within a US business day or two they'll convert your HKD to USD at nearly the same rate as you'd get if you Google: XXXHKD to USD. Then buy US treasuries or SWVXX or whatever floats your boat.

Second-hand US treasuries maturing in ~3 months bought via Schwab (as of 23 Feb '25): ~4.33%
SWVXX: 4.19% (trailing 7 day yield to APY conversion) that has an auto-reinvest option versus US treasuries that need to be manually repurchased in the appropriate amounts and at the appropriate times. Of course some entities are happy to buy treasuries or their equivalents for you for a fee.

On a related note, for good enough USD to HKD conversions for personal expenses tracking, I like 1USD=7.8HKD. If I feel like estimating the worst possible value of HKD converted to USD I'll put 1USD=7.85HKD.

[shri]

BlackRock has two interesting money market fund ETFs out last week. GMMF and PMMF have not looked at the WHT issues with this.

[newhkpr]

Don't you pay 30% withholding on US money market funds and ETFs?

[becomjapanHK]

Isn't $BOXX better than SWVXX ??

[aw451]

Don't you pay 30% withholding on US money market funds and ETFs?

You do, they it's refunded at the end of the financial year. Or you can use BOXX as @becomejapanHK said, which uses box trades in the underlying to achieve roughly the same results.

[newhkpr]

You do, they it's refunded at the end of the financial year. Or you can use BOXX as @becomejapanHK said, which uses box trades in the underlying to achieve roughly the same results.

I never got a refund? How? where? By filing US taxes?

[LoganH]

Isn't $BOXX better than SWVXX ??

I'd previously never heard of BOXX, but I'd put it in the to each their own box.

I just like how easy Schwab makes it to buy and auto-reinvest any amount in SWVXX. I have issues with seeing any amount above $0.00 in cash in my Schwab brokerage account, and because I'm ridiculous I even sometimes buy a few cents of SWVXX, or just a bit more than 1USD because sometimes some residual cash earns Schwab's pitful 0.05% interest before I manage to put it in SWVXX or elsewhere.

As for using Schwab HK to buy SGOV, I haven't seen a refund of the 30% WHT, but not that much SGOV was bought, so it can be treated as a test and learning experience on how to avoid getting hit with 30% WHT while using Schwab HK (as let's say a person with only a HKSAR passport and not required to file a US tax return).

What seems to work well enough is to buy US treasuries at auction through Schwab's interface, and Schwab HK (no margin) lets you overbuy (YMMV) some US treasuries without fees (no guarantees though). I haven't figured out the limit on how much Schwab HK let's a client overbuy (without fees), but if you could overbuy enough to cover soon to be maturing US treasuries you could decrease the frequency of needing to purchase new treasuries as they mature and/or pay out (usually semi-annually).

I will say paying 30% WHT on essentially US treasuries (or their equivalents) sucks, so I'd avoid that when it's easy enough and jumping through hoops to try to get back WHT that didn't acutally need to be paid is also something I'd try to avoid.

[becomjapanHK]

Only on the dividend payouts.....not the capital gain.

There are funds you can get in like Jersey / Luxembourg / Isle of Man etc....and similar where you can receive the gross dividend BUT the initial + ongoing fee levels can be quite steep........

[becomjapanHK]

The great thing with $BOXX is that you get the pure growth (almost) without a tax inefficient dividend.......also can be used as a holding to borrow against, so popular from those looking for tax efficiency overall with better growth than cash and similar to treasuries etc....

Due to the tax on the yield of SWVXX I think that you would barely get to 4% return on it after the withholding tax on the dividends.

$BOXX is a good instrument if you were to leave HK too........as it doesn't create any income and can be borrowed against and is immediately able to be liquidated......

[aw451]

I never got a refund? How? where? By filing US taxes?

I should clarify that it depends on the fund underlying assets. I bought T Bills (via SGOV) which will be refunded this month. Other money market and bond funds won't necessarily be refunded.