Hong Kong to issue HK$20 billion retail infrastructure bond, the second in 2 months

The bond, which have a tenor of three years, will provide assured returns of 3.5 per cent to be paid every six months

Hong Kong is raising HK$20 billion (US$2.7 billion) from its second batch of retail infrastructure bonds, giving residents another chance to take part in the city’s development.

The three-year bonds will pay half-yearly interest based on the average rate of the consumer price index over that period, with a guaranteed minimum payment of 3.5 per cent, according to a government statement on Friday.

“The retail infrastructure bond will provide citizens a safe and reliable investment option with steady returns, as well as a ‘sense of participation’ and a ‘sense of gain’ in support of infrastructure projects for Hong Kong’s long-term development,” Financial Secretary Paul Chan Mo-po said in the statement.

“This issuance will also further promote the development of the retail bond market and financial inclusiveness.”

Hong Kong identity card holders will be able to subscribe to a minimum of HK$10,000 and increments thereof at placing banks, securities brokers and the Hong Kong Securities Clearing Company from 9am on November 26 up to 2pm on December 6. The bonds will be issued on December 17 and listed on the Hong Kong stock exchange the next day.

Hong Kong government and banking officials at a briefing for the launch of the HK$20 billion government retail infrastructure bond at the HKMA’s offices on Friday. Photo: Enoch Yiu
Hong Kong government and banking officials at a briefing for the launch of the HK$20 billion government retail infrastructure bond at the HKMA’s offices on Friday. Photo: Enoch Yiu

The government may increase the bond’s size to a maximum of HK$25 billion, depending on the response.

The previous HK$50 billion Silver Bond issued last month was ninth by the government and the first time they had been issued under the infrastructure bond framework.

Proceeds from the sale will go to the Capital Works Reserve Fund to finance infrastructure projects such as the New Territories East Cultural Centre in Fanling, Trunk Road T4 in Sha Tin, and infrastructure works at Kwu Tung North New Development Area.

The bond’s assured return of 3.5 per cent is lower than the 4 per cent offered by the Silver Bonds, which were restricted to residents aged 60 and above. The rate is also lower than the 4.75 per cent government retail green bond issued in September last year.

“Even though the guaranteed rate is lower than the retail green bonds last year, the return is still attractive as the interest-rate cut cycle that started in September is expected to continue next year,” Arnold Chow, deputy general manager of personal digital banking product department at Bank of China (Hong Kong) (BOCHK), said at a media briefing on the bond offering.

The bond is rated Aa3 by Moody’s Ratings.

The rating is very high and suitable for investors who want to invest in low-risk products, Wong Tsz-cheuk, head of Greater China FX cash and EM rates trading at HSBC, said at the same briefing.

HSBC and BOCHK are the co-arrangers for the bond.

Separately, China’s finance ministry issued US$2 billion worth of dual-tranche senior bonds in Saudi Arabia this week, according to arranger Standard Chartered. The bond is listed on Nasdaq Dubai and the Hong Kong stock exchange.

“This landmark deal marks another milestone in the China-Middle East relations with Middle Eastern investors subscribing to the [Ministry of Finance] bonds for the first time,” said David Yim, head of capital markets for Greater China and North Asia at Standard Chartered.

The bond was popular as more than 200 global institutional investors subscribed to a total of US$40 billion, which shows China’s sovereign credit is well regarded by global investors amid market volatility, Yim said.

The bond comprises a three-year US$1.25 billion senior tranche and a five-year US$750 million senior note, the finance ministry’s first US dollar bond issue since 2021.

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