Rush for iBonds but muted dawn

Finance | 24 Jun 2021

Avery Chen and Kevin Xu

The latest round of inflation-linked retail bonds, or iBonds, rose only about 3 percent in gray markets ahead of debut, despite receiving an overwhelming response.

The eighth series of iBonds were trading at HK$103 in Phillip Securities' gray market last night, up 3 percent from the offering price, meaning investors have a paper gain of HK$300 per board lot. The shares closed at HK$102.80 in Futu Securities' platform and HK$102.95 in Bright Smart Securities gray market.

That's lower than an average 4.5 percent gain on the first trading day of the previous seven series.

Thomas Kwok Ka-on, head of equity business at Chief Securities, expects iBond will rise to between HK$103 and HK$104 today.

He suggested short-term investors could take profit after the iBonds price rises above HK$104. But given low interest rates and a pickup in inflation in the United States, many investors intend to hold iBonds for dividends, Kwok expects.

The latest iBonds has attracted HK$53.94 billion from nearly 710,000 investors, both record highs. About 85 percent will get three board lots - the maximum amount that the government will allot to a local subscriber.

The final issue amount is HK$20 billion, making it the largest since 2011.

The overwhelming response came at a time when Hong Kong's economy is seeing green shoots of recovery, with rising consumer prices and falling unemployment figures, while interest rates remain low.

Hong Kong's overall consumer prices rose 0.7 percent in April over the same month a year earlier after an increase of 0.5 percent in March, says the Census and Statistics Department.

The seasonally adjusted jobless rate between February and April fell by 0.4 percentage points to 6 percent for the period between March and May, the lowest level since the rate stood at 5.9 percent in the period between March and May last year.

The eighth series will pay interest once every half-year at a rate linked to inflation, subject to a floor of 2 percent - double the 1 percent guaranteed minimum payment which the government offered five years ago.

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