Fewer elderly Hongkongers buying ‘silver bonds’ amid low interest rates

Amount purchased this year down 53 per cent from last year

PUBLISHED : Thursday, 15 June, 2017, 9:16am
UPDATED : Thursday, 15 June, 2017, 9:16am

The government’s second “silver bond” offering targeting Hong Kong residents aged 65 or older appears to have lost its appeal, with the number of subscribers dropping 40 per cent from last year.

A government spokesman said about 45,000 people – over 31,000 fewer than last year – had purchased around HK$4.2 billion in bonds, an amount that was 53 per cent lower than last year.

He said the government would announce the final subscription and purchase totals for the batch next Wednesday.

The interest rate is too low to appeal to elderly buyers
Andy Kwan Cheuk-chiu, economist

The issue, with a tenor of three years, is aimed at raising HK$3 billion. It offers holders an interest rate pegged to the city’s inflation, subject to a minimum rate of 2 per cent.

Silver bonds offer a rate of return double that of an iBond, which is also inflation-linked but open to people of all ages.

Unlike the iBond, however, silver bonds are not available in the secondary market. Holders can sell their bonds before maturity to the government at the original price with the unpaid accrued interest.

Economist Andy Kwan Cheuk-chiu, director of ACE Centre for Business and Economic Research, said silver bonds’ flagging popularity was to be expected during a period of low interest rates.

“The interest rate is too low to appeal to elderly buyers,” he said.

Hong Kong readies for second ‘silver bond’ issue

Kwan added that although the bond carried little risk, there had been no lack of public utility stocks also carrying low risk yet offering higher interest rates, such as those of CLP Group, which offered a rate of about 3.5 per cent.

“The investment atmosphere has been good,” he said. “Many elderly people do not want to lock their money up for three years and would rather buy stocks.”