Senior citizens pounce on government’s ‘silver bond’ offering

Banks have declared the investment product for people over 65 years old a success after subscriptions reach HK$9 billion before closing Wednesday

PUBLISHED : Wednesday, 03 August, 2016, 9:12pm
UPDATED : Wednesday, 03 August, 2016, 10:54pm

Hong Kong’s first batch of government bonds targeted at the elderly have proven to be a success, with the total value of subscriptions exceeding three times the issue amount.

Around 75,000 senior citizens aged 65 or above subscribed to the “silver bonds” – investment products with a return rate double that of an iBond, an existing inflation-linked retail bond open to all ages.

The total value of subscriptions reached HK$9 billion, three times the maximum issue size of the bond of HK$3 billion, according to preliminary figures from a government spokesman.

At least three different designated banks said each subscriber applied for an average of 10 to 12 lots of the bond, or up to HK$120,000.

Announced in the 2016-17 Budget and launched just last month, applications for the bond, which will be issued from August 12 with a three-year tenor, closed on Wednesday.

Hong Kong senior citizens targeted with new ‘Silver Bonds’ offering returns double those of iBonds

According to the allocation mechanism, the government will satisfy investors who applied for a smaller number of lots, and then distribute the remaining bonds by ballot.

On average, each investor can be allocated four lots, or HK$40,000 each, and they would be guaranteed at least HK$800 in interest a year.

The bond holders are to be paid interest once every six months at a rate linked to inflation in Hong Kong, subject to a minimum rate of 2 per cent.

This means that, even if inflation was lower than 2 per cent, every subscriber would still get a 2 per cent return.

Winnie Cheung Wing-sze, head of treasury product management at the Bank of China, said the response exceeded her expectations.

“Both the number of people that applied and the amount they invested were better than what we expected,” Cheung said.

Cheung said that the number of elderly who applied for the silver bonds was up 27 per cent compared to the number of applicants over 65 years old who subscribed to the latest batch of iBonds.

The value of the total subscription was nearly double that of those who subscribed to iBonds, Cheung added.

Louis Tse Ming-kwong, director of VC Brokerage, said that the government should consider increasing the size of the bond when it issues the second batch next year.

“The [silver bonds] is quite a safe haven for investors. If there is a demand there, why not?” Tse said.