The Hong Kong Special Administrative Region government announced plans on Friday to launch a retail infrastructure bond, as the city strives to better manage the cashflow needs for major infrastructure projects and facilitate the early completion of projects for the good of the economy and people’s livelihoods.
The target issuance size of the retail infrastructure bond is HK$20 billion ($2.57 billion) and could be scaled up to HK$25 billion depending on the market response, with each lot offered at HK$10,000 and a tenor of three years, the SAR government said.
Interest will be paid semi-annually at a rate linked to inflation in Hong Kong, subject to a minimum of 3.5 percent. A maximum allocation quota of HK$1 million is set for each qualified investor.
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The subscription period for the bond will commence on Nov 26 and end on Dec 6.
Following the recently issued Silver Bond, the Retail Infrastructure Bond is the second batch of bonds for public subscription under the Infrastructure Bond Program, which was raised in the 2024-25 budget in February.
“The government's issuance of the retail infrastructure bond will provide to 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. This issuance will also further promote the development of the retail bond market and financial inclusiveness,” said Financial Secretary Paul Chan Mo-po.
It is anticipated that the bond will have more than 300,000 subscribers, said Arnold Chow, general manager of the personal digital banking product department of the Bank of China (Hong Kong).
“The market view is that interest rates will continue to drop in the next few years, but the bond tenor will last for three years. So for many people it is a good opportunity to lock the 3.5 percent interest rate,” Chow said.
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The US Federal Reserve cut the interest rate by another 25 basis points on Nov 7, marking the second rate cut this year since September.
“The Retail Infrastructure Bond can be purchased by all Hong Kong citizens. It has a wider buyer base compared with the Silver Bond, which is only purchasable for citizens over 60 years old,” said Billy Mak Sui-choi, associate professor in the Department of Accountancy, Economics and Finance at Hong Kong Baptist University’s School of Business.
Since this batch of bonds can be sold in the secondary market and has robust characteristics, Mak said institutional investors may be attracted to enter the market.
Contact the writer at thor_wu@chinadailyhk.com
