HKMC plans retail bond sale to raise HK$1b fund

The Hong Kong Mortgage Corp, a government-owned agency set up to bolster the home loan market, plans to sell as much as HK$1 billion in retail bonds as early as next month, according to chief executive James Lau.

He said that as always, the company would look at the market's demand and supply to decide its bond issue. 'Some people think interest rates are stable and could even come down, [which might favour a bond issue],' he said.

The HKMC, which raises money to finance purchases of mortgage loans from banks, said it estimated the size of the next retail bond issue at HK$800 million to HK$1 billion.

While he would not disclose more details, Mr Lau said he believed investors might prefer to invest in bonds with short tenures.

In its last sale, the HKMC issued more than HK$1.2 billion worth of retail bonds in September last year, including a first-ever zero-coupon tranche.

The agency, created during a shortage of new mortgage supply, has been battling to find a place for itself now that the loan market is flooded with liquidity, diminishing the need for banks to offload mortgages to third parties.

'I think the mortgage market will see growth this year but not to a large extent, so banks may not be keen to sell their assets,' a banker said.

While he would not specify where this next round of fund raising would be used, Mr Lau said the HKMC was considering diversifying its portfolio by buying non-mortgage assets and extending its reach to mortgage purchases in other Asian markets.

'We are still studying the issue [of buying overseas mortgage] to see if there are any assets for sale in other countries, their credit quality [and their] legal system,' he said.

He said that even after the HKMC found a suitable overseas buying target, it would take a while for the company to receive the approval from its board.