Airport bond sale off to a flier

Investors on average subscribed nine board lots of the Airport Authority's retail bonds on its first bookbuilding day, according to the Bank of China Hong Kong (2388).

Issued by the operator of Hong Kong International Airport, subscriptions for the retail bonds started yesterday, featuring a fixed interest rate of 4.25 percent with a tenor of 2.5 years. The minimum investment cost is HK$10,000 per board lot.

As one of the co-leading banks in issuance, BOCHK projects this batch of bonds will be oversubscribed, as the interest rate of above 4 percent in the next few years will be attractive to investors preferring stable returns amidst expectations of interest rate cuts this year.

Another co-leading lender, The Hongkong and Shanghai Banking Corporation, said the number of subscribers yesterday was close to that of the retail green bonds issued by the government, which received active responses last year.

The Industrial and Commercial Bank of China (Asia) said their clients booked eight board lots on average, in line with their expectations.

ICBC thinks this batch of AA bonds is more advantageous than the previous retail bonds as they can be redeemed fully in advance, in addition to the quarterly interest payment.

China Citic Bank International revealed that its average subscription amount was HK$80,000, namely eight board lots as well.

Since interest rates in Hong Kong have fallen recently, some brokerages such as Futu Securities, recommended investors subscribe to about five board lots and hold them, regardless of how they fared in the market.

By holding the bonds until maturity, investors with 10 board lots can garner a total of HK$10,625 worth in interest.

The interest rates for one-year time deposits have been slashed by the city's banks to around 4.3 percent from the peak of 5.25 percent at the end of last year.

Meanwhile, lenders are offering waivers of various fees to compete for retail investors. HSBC, for example, gives up eight kinds of charges, such as handling fees, custody service fees, interest collection fees, and others.

Aiming to raise up to HK$5 billion, the Airport Authority plans to use the proceeds for its third runway project.

Subscriptions will close next Thursday and the bonds will be listed on the Hong Kong Stock Exchange on February 6.