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Amanda Lee

The government's first inflation-linked bond defied expectations to rise 6.7 per cent on its trading debut on the Hong Kong stock exchange yesterday after just 150,000 investors subscribed to the product.
The minimum investment  was HK$10,000 and so the bond was potentially available to up to one million Hong Kong residents.
The iBond is designed to counter inflation  from soaring food and property prices in the city, which have hit savers. The tax-free government bond, which matures in 2014, pays investors at least one per cent interest every six months. If inflation is higher than 1 per cent, the bond will pay a rate linked to the composite consumer price index, a measure of inflation.
But the AAA-rated Hong Kong government had mixed success getting retail investors interested.  
Its last attempt to sell bonds to the public generated only HK$7.5 billion.  
Financial Secretary John Tsang Chun-wah said he was satisfied with the iBond's reception. He  expected inflationary pressure to continue, driven mainly by  rents  and food prices. 
According to a filing with the stock exchange this week,  155,835 valid applications were received for  iBonds worth HK$13.16 billion, meaning the HK$10 billion offering was oversubscribed.
Brokers said some retail investors had not been keen on the issue because they thought the return was low and the bonds seemed less attractive than shares.
'A lot of investors thought they would have been allocated just the minimum so the bond didn't appeal to them,' said Alvin Cheung, associate director at Prudential Brokerage. 
Cheung said: 'The bond market is not expected to be as volatile as equities.' 
The bonds, which were issued at HK$100, closed at HK$106.70, gaining 6.7 per cent.
Turnover was  HK$159 million, which analysts said was better than expected because there had been concerns that secondary-market liquidity would be too thin for investors wanting to sell their allocation on the first day.
Brokers still have reservations about whether retail investors will show much interest in the secondary market for iBonds. Inflation in Hong Kong over the next six months is expected to hover around 5 per cent, so with a minimum investment of HK$10,000 bondholders will collect HK$500 in the first interest payment in January. 
VC CEF Brokerage director Louis Tse Ming-kwong believes there is little room for short-term gain on the bond, whih will discourage those retail investors who prefer trading to long-term buying and holding. 
HSBC said iBonds account for  less than 0.5 per cent of cash deposits in Hong Kong.
5%
This is the estimated rate of inflation over the next 6 months
- HK$10,000 of iBonds would therefore earn HK$500 come January



Surprise 6.7pc rise for iBonds on debut