Hong Kong iBonds attract strong investor interest

Number of buyers of HK$10 billion government issue expected to surpass last year's 520,000

PUBLISHED : Thursday, 24 July, 2014, 1:06am
UPDATED : Thursday, 24 July, 2014, 1:06am

The sale of the fourth batch of inflation-linked bonds worth HK$10 billion attracted hundreds of thousands of investors yesterday, although the number of subscribers appears to have grown at a much slower rate than last year's robust pace.

"Over 520,000 people subscribed last year and it was already a huge number. This year, the number may be similar or even higher than last year's," a banker who monitored the sale said.

The number of subscribers rose about 10 per cent from last year at major banks such as Bank of China and Bank of Communications, which started taking orders for the iBonds yesterday.

Hang Seng Bank, DBS, Dah Sing Bank and Fubon Bank received about the same number of applications as they did last year.

In comparison, the number of subscribers last year grew 40 to 50 per cent on average at major banks such as HSBC, BOC, Bocom and DBS.

One banker said the modest growth this year could be because the government bonds were launched a month later than last year and at a time when many people went on holiday.

A new trend emerged this year: more investors were buying the iBonds online, said Gary Leung Wai-kei of BOC.

About 48 per cent of the bank's investors applied for the bonds through their online accounts this year, up from last year's 44 per cent, Leung said.

The bonds carry a floating interest rate linked to the consumer price index for the preceding six months. The minimum rate is 1 per cent, payable every six months.

Investors have until July 31 to apply for the bonds.

The subscribers to last year's bonds was more than triple the 155,835 applications for the first batch in 2011 and 58 per cent higher than the 332,467 who applied in 2012.

IBond sales have become a battleground between banks and brokers for new customers. Most banks and brokers would waive fees and interest income charges, among others, to attract investors.

At brokerage firms, the sales performance painted a mixed picture.

Bright Smart Securities, one of the city's largest brokers, saw a 20 per cent jump in the number of subscribers.

Another key player, Phillips Securities, saw only 7,200 subscribers this year, down nearly 20 per cent from last year's 8,800.

The lower inflation rate is also seen as a major reason for slower growth in the subscriptions. Inflation fell to 3.6 per cent last month, the lowest level since January last year.

The first batch of iBonds will mature this month and has delivered an accumulative return of 14.08 per cent.