HK$50b rush for HK$10b iBonds
Low bank deposit rates and a sagging equity market are driving jaded investors into the arms of the Hong Kong government, which says demand for its inflation-linked bonds has surged.
More than 330,000 people subscribed to this year's iBonds over the past week, bringing the subscription amount at HK$50.2 billion, more than five times the HK$10 billion on offer, a government spokesperson said.
Last year, the inaugural HK$10 billion batch of iBonds attracted HK$13 billion in applications.
The bonds, which will be issued on June 22, are part of an effort to develop the city's debt market and protect residents against inflation, the Hong Kong Monetary Authority (HKMA) says.
'The overwhelming response can partly be attributed to the good investment return of the first [iBond] offer last year,' said Eric Fu, HSBC's head of wealth development for Hong Kong, retail banking and wealth management. 'The low interest rate environment and the fact that it's a relatively low-risk investment make iBonds an attractive option.'
Analysts say iBonds are seen as safe-haven investment products, particularly since the government may decide to raise public housing rents and public transport fares again, pushing inflation higher.
Raymond Yeung, an economist at ANZ, however, warned that iBonds were subject to policy risk, even though they were virtually free from sovereign risk.
'Should the new administration of C.Y. Leung pledge a bigger package of relief measures, headline inflation could be lowered, reducing the iBond's payout rate,' said Yeung. The three-year bonds, with a minimum subscription of HK$10,000, pay a floating interest rate aligned with the consumer price index. The minimum interest rate is 1 per cent, and interest is payable every six months.