How can Hong Kong investors best protect against inflation? High-yield bonds may provide the answer
- About one-third of developed-market government bonds are trading at negative yields now. This essentially means paying a government for the privilege of borrowing money from it. But some believe bonds can still deliver capital gains
Inflation in Hong Kong stood at 3 per cent in July. Given that most Hong Kong dollar savings accounts are paying close to zero interest, savers are effectively being robbed by the silent thief of inflation. For every HK$10,000 in a savings account, you lose HK$1 in purchasing power every day. This may not sound like much, but it all adds up when investment prospects are becoming more challenging.
If it is any consolation, Hongkongers are not the only ones facing poor cash returns. Europe and Japan are, too. While most European banks are avoiding charging depositors, the interest rate environment is becoming more difficult. One Danish bank recently started charging negative interest rates on deposits of more than 7.5 million kroner (HK$8.8 million). Some Swiss banks may also start doing the same this year.
