Trading flat predicted for green bonds

Themis Qi

Hopes for a windfall from the latest batch of green bonds sagged after the papers were traded for only up to 0.8 percent - or a gain of HK$80 per lot - above the offer price in the gray market on the eve of their debut today.

Some analysts advised investors to hold onto the three-year-bonds for interest payments even if they fall below the offer price of HK$100.

Data provided by Futu showed that the second batch of green bonds issued by the SAR government peaked at HK$100.8 apiece during the day before reversing to close at the offer price of HK$100 on Futu's platform in gray market trading yesterday.

The bonds had opened 0.7 percent lower in the morning.

Bright Smart (1428) said the green bonds closed 0.15 percent higher, or HK$100.15 apiece, after hitting an intraday high of HK$100.6.

On the platform of Phillip Securities, the bonds showed no changes in prices when the trading ended, after touching HK$100.2.

This batch of retail green bonds attracted 321,000 valid applications, 34 percent fewer than last year. The aggregate subscription amount reached HK$30 billion, exceeding the issuance upper issuance limit HK$20 billion set by the government.

Investors have been allocated up to nine lots per subscription.

Offering an annual interest rate of at least 4.75 percent, investors holding nine lots can look forward to earning HK$12,825 in interest over three years.

Phillip Securities estimated that the bonds issued this year would not trade below the offer price, with a limited range up to HK$100.25.

However, Chief Securities forecast the price to slip to as low as HK$99.5 apiece, as some investors may instead turn to US dollar assets to reduce risks.

If the bonds are traded at HK$99.5 or below, investors could consider buying the bonds in the market to earn interest, added Chief Securities.

Tiger Brokers agreed that investors should hold the bonds as the offered interest rates are slightly higher than some existing deposit rates offered by local banks.

Meanwhile, many lenders put up offers for returned cheques.

In the case of China Citic Bank International, the lender offers a deposit interest rate of up to 7.28 percent as long as green bond subscribers use their returned funds to register the Monopoly deposit scheme before October 30.

Dah Sing Bank also offers a 4.4 percent interest rate per annum for three-month time deposits in Hong Kong dollar and a 5.2 percent rate for USD deposits with the same maturity.