The government will launch the fifth batch of inflation-linked retail bonds (iBonds) worth HK$10 billion next week, and it's expected to be well received by local residents.

The latest batch will carry a tenor of three years and holders will be paid interest once every six months at a rate linked to Hong Kong's inflation, or a fixed minimum rate of 1 percent, whichever the higher. The minimum denomination will be HK$10,000, according to a sales document distributed at a press briefing on Thursday.

The subscription period will be from July 21 to 29, and the iBond will be listed on the local stock exchange on Aug 10.

Only Hong Kong residents are allowed to invest in iBonds. They may apply through any of the placing banks, securities brokers or Hong Kong Securities Clearing Co Ltd.

"This new batch of iBonds should be very popular as its interest rate is expected to be attractive. In the past years, the average interest rate (for iBonds) is 4.39 percent," said Gary Leung, deputy general manager for global markets at Bank of China (Hong Kong) Ltd.

"People will always look for a safe haven whenever there's an 'earthquake'. I believe iBonds are safe for investors (compared with other investment channels)," said William Shek, Asia Pacific managing director of HSBC.

Apart from local retail investors, institutional investors may also be interested in iBonds, and may try to buy them in the secondary market since they are not allowed to subscribe to them.

"Institutional fund managers need the stable and virtual risk-free returns to raise overall return rates for their managed portfolios. The average return from investing in iBonds is estimated at about 2 percent higher than the average yield for government bonds traded in the secondary market," Billy Mak Sui-choi, associate professor of the Department of Finance and Decision Sciences at Hong Kong Baptist University, told China Daily.

The government first issued iBonds in 2011 to offer the public an investment channel to hedge against soaring inflation at a time when the city's inflation rate was 5.3 percent. Many investors were attracted to the bonds because of the government's AAA credit rating.

iBonds have enjoyed tremendous popularity among local residents, with the government receiving HK$28.8 billion in subscriptions from 488,170 people for a HK$10-billion linker sale last year, according to the Hong Kong Monetary Authority. In 2013, there were subscriptions worth HK$39.6 billion from 520,823 people for issuance of the same amount.

In 2013, Hong Kong's inflation rate rose to 4.3 percent from 4.1 percent in 2012 and, last year, it was 4.4 percent.

The government has forecast that the local inflation rate this year will be 3.2 percent.

sophiehe@chinadailyhk.com

Apart from local retail investors, institutional investors may also be interested in iBonds, and may try to buy them in the secondary market since they are not allowed to subscribe to them. Photo Provided to China Daily

(HK Edition 07/17/2015 page10)