Record iBond subscription means many Hong Kong investors will face allocation limit

PUBLISHED : Wednesday, 05 August, 2015, 10:52pm
UPDATED : Wednesday, 26 October, 2016, 2:38pm

The record high subscription to the Hong Kong government's latest batch of inflation-linked retail bonds, or iBonds, means about one-third of the subscribers will only be allocated one unit.

Details of the subscriptions released by the government yesterday showed a total 597,895 applications - up 22.5 per cent from last August. It was the best response since the inflation-linked retail bond was launched in 2011.

The value of total subscription, at about HK$35.7 billion, also jumped about 24 per cent from HK$28.8 billion last August.

The final issue amount is HK$10 billion.

On average, each subscriber applied for 5.9 lots this year, same as last August, but compared with 7.6 lots each in 2013, 15 lots in 2012 and 8.4 in 2011. One lot is equal to HK$10,000.

According to the allocation mechanism, all applications will be allocated one unit of bond first and 402,105 of those who had applied for more than one unit would get one additional unit after a ballot.

The new batch of iBonds will be issued tomorrow and listed on Hong Kong's stock exchange on Monday. Analysts have attributed the good response to recent fluctuations in the stock market.

But Secretary for Financial Services and the Treasury Professor Chan Ka-keung yesterday said he believed it had more to do with investors' increased knowledge of the product.

The government launched its first batch of iBonds in 2011, attracting 155,835 applications, which rose to 525,359 by 2013.

The issuance of iBonds marks an initiative announced by Financial Secretary John Tsang in his 2015-16 budget to further develop the local bonds market.

They will be valid for three years and bond-holders can expect interest every six months at rates linked to inflation in Hong Kong, subject to a minimum of 1 per cent.