Editorial | Green bonds the way to go for safer future in Hong Kong
- With Hong Kong set to become a premier green finance hub, such financial instruments not only provide steady income, but also capital to help protect the environment
With stocks and bonds falling globally, it should not be surprising that Hong Kong’s first green bond for retail investors slipped slightly on its debut.
Even without the current volatility over outlooks on the global economy, local selling pressure was bound to be tremendous when punters were eager to make a quick buck rather than waiting for the semi-annual interest payment.
For conservative or long-term investors, though, it will make no difference as long as they hold the inflation-linked bonds to maturity in three years. They can safely ignore the short-term volatility with a financial instrument that is also designed to protect the principal.
Despite the lacklustre debut, the bonds were actually well-received. Some 493,000 investors poured HK$32.88 billion (US$4.19 billion) into the offering, equivalent to an oversubscription rate of 1.2 times.
Interest payment will be based on the inflation rate over the past half-year period, with a guaranteed minimum of 2.5 per cent. That is more generous than the 2 per cent rate guaranteed with the last government-issued, inflation-linked iBonds.
Local inflation stood at 1.7 per cent in March, while the government forecast inflation at 2 per cent for the whole of this year. Rising inflation, of course, has become a worldwide concern, contributing to crushed stock markets and casting a pall over major economies, including China’s.