Hong Kong’s first Retail Green Bond sells out with US$4.2 billion in orders, auguring well for city’s role as funding hub for climate-friendly projects
- The three-year note, offering a 2.5 per cent return on a minimum investment of HK$10,000, was 1.2 times oversubscribed
- Strong response boosted by volatile stock market as investors seek a safer bet, says Bright Smart Securities boss
The three-year note, which offers a 2.5 per cent return on a minimum investment of HK$10,000 (US$1,274), attracted HK$32.88 billion (US$4.2 billion) from 493,000 people, a government spokesman said on Friday.
Because of the strong response, the size of the initial tranche will increase from HK$15 billion to HK$20 billion. The allotment will be announced on May 16 before the bond is listed on the stock exchange three days later.
“The strong response to the green bonds is due to the volatile stock market in recent months, which has led investors to opt for fixed income products with lower risk,” said Edmond Hui Yik-bun, chief executive of Bright Smart Securities, one of the largest local brokerages.
“There is a group of investors who like to buy stocks with stable dividends, and this retail green bond has a 2.5 per cent guaranteed return, which is attractive.”
Bright Smart said 65,000 investors had applied for a combined HK$3.8 billion, the highest individual subscription being HK$800,000.
Hang Seng Bank received applications for an average of HK$80,000, while Bank of China (Hong Kong) said it processed subscriptions of HK$70,000 on average.
CMB Wing Lung Bank said applicants had subscribed to HK$100,000 worth of bonds on average, the highest being HK$10 million. ICBC Asia saw subscriptions of HK$90,000 on average, with one application for HK$5 million.
Here’s how your investment in Hong Kong’s green bond fights climate change
The bond will pay interest every six months, based on the inflation rate over that half-year period, guaranteed at a minimum of 2.5 per cent, which is more generous than the minimum 2 per cent rate on similar inflation-linked bonds known as iBonds.
Both bonds would beat the inflation rate of 1.7 per cent in March and the standard rate on bank deposits of close to zero.
Hong Kong had already issued more than US$7 billion of green bonds for institutional investors in recent years. This is the first time the government has issued this type of product purely for individual retail investors.
The issuance of the climate-friendly bonds is part of government efforts to promote the city as a green finance hub.