HSBC offers first Islamic bonds to HK investors

PUBLISHED : Thursday, 02 April, 2009, 12:00am
UPDATED : Thursday, 02 April, 2009, 12:00am

HSBC has started selling Islamic bonds in Hong Kong, becoming the first bank in the city to offer the service to retail investors.

Bruno Lee, the bank's head of liabilities business and wealth management, said the move could provide more alternatives for Hong Kong investors seeking a diversified portfolio. It could also help 'further broaden Hong Kong's capability as a global financial centre', he said.

HSBC will place the bonds, also known as sukuk, with investors, with a minimum amount of US$100,000 each. Investors should own assets worth at least US$1 million, it said.

Mr Lee did not disclose further details, saying only that the return was less than 100 basis points above the London interbank offered rate.

Sukuk are products based on Islamic law, which bans investment in casinos, tobacco, alcohol or port-related business. It also prohibits investors from receiving interest but allows profit sharing.

HSBC has been selling the two Islamic bonds, with maturities between three to five years, in other markets. It is not their issuer. Mr Lee said Hong Kong has a Muslim population of about 100,000, but non-Muslims could buy Islamic bonds.

Chief Executive Donald Tsang Yam-kuen unveiled plans in 2007 to establish Hong Kong as an Islamic finance centre.

A veteran banker said many banks had been offering the service for a long time to private banking clients who wanted to buy or sell sukuk.

'The performance of Islamic bonds is not very good this year, as many investors are still cautious about developments in the Middle East market,' the banker said.

Mr Lee said Islamic banking assets worldwide were expected to grow 10 to 15 per cent this year and would amount to as much as US$1.4 trillion in 2012.