Infrastructure bonds may pull funds from stocks

June Chen

Hong Kong opens subscriptions tomorrow for its three-year retail infrastructure bonds, offering a guaranteed minimum rate of 3.5 percent per annum.

The offering may divert funds from the fluctuating stock market, said Francis Kwok Sze-chi, the vice chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators.

If the return on the bond is better than a time deposit's interest rate, investors may deploy money from the stock market to bonds, he said.

Three major banks in the city are offering preferential deposit rates up to 3.3 percent for new funds.

Standard Chartered offers a six-month deposit for new funds at 3.1 percent per annum, the Hongkong and Shanghai Banking Corporation offers a three-month at 3.3 percent and Bank of China Hong Kong (2388) has a three-month deposit at 3 percent.

The target size of the retail infrastructure bond is HK$20 billion, with each lot offered at HK$10,000 and a tenor of three years. Interest will be paid semi-annually at a rate linked to inflation in Hong Kong, subject to a minimum of 3.5 percent.

Although the airport and silver bonds issued earlier offer higher rates at 4.25 and 4 percent respectively, market watchers view the new bond as attractive, despite the US Fed kicking off its rate cut cycle.

In other news, Kuaishou Technology (1024) and New Oriental Education & Technology (9901) will be added to the Hang Seng Index and New World Development (0017) will be excluded for the second time following a quarterly review, effective on December 9. The weights of Kuaishou and New Oriental will be 1.28 and 0.23 percent respectively. The number of members on the benchmark will rise from 82 to 83, with 24 of them from Hong Kong.