Chen maobo: re pushing inflation linked bonds to give citizens more room to participate

category:Finance
 Chen maobo: re pushing inflation linked bonds to give citizens more room to participate


Chen maobo wrote in his article:

The stability of the financial system is related to the economy and the peoples livelihood. Financial services is one of the pillar industries in Hong Kong, contributing about 20% of GDP. It serves the development of different industries in the real economy and the business and financing needs of enterprises. Although the development of the financial market can stimulate Hong Kongs economic activities, it would be more ideal if the public could also have more space to participate and benefit from it. It is under this consideration that I decided to re launch the ibond in the budget released at the beginning of this year. The relevant preparatory work is ready, and the details of the issuance will be announced soon.

Why can the reintroduction of ibond enable citizens to participate in the development of financial markets to a greater extent? Ibond had more than 150000 subscribers at the time of its initial offering in 2011 and increased to more than 500000 participants by 2016, with a total issuance of HK $60 billion in six years. Compared with other retail bonds launched by the government before ibond was launched, the total number of subscribers was only about 35000, and the total amount of issuance was about HK $7.5 billion. This shows that ibond is welcomed by many people. This is not only conducive to the development of the retail bond market, but also provides a stable return and capital preservation investment option for the public.

Or some friends may ask, at a time when inflation is still at a low level and the market is even worried about whether Hong Kong has a chance to fall into deflation, is it still attractive to issue ibond? In fact, the global low interest rate environment is likely to last for a long time, and the inflation risk brought by the large-scale monetary easing policies implemented in major overseas markets in the medium and long term can not be ignored. In this context, ibonds design just takes advantage of taking both sides into consideration. If the Composite CPI is negative, the minimum return guarantee provided by ibond ensures that investment will not fall into zero return due to deflation. In view of the current environment, we have restarted the issuance of ibond this time. We have optimized some terms of the bonds, including the minimum interest rate guarantee. The latest batch of ibonds will have a higher minimum interest rate guarantee than before, reaching 2%. In the current ultra-low interest rate environment, it is undoubtedly attractive. If inflation rises, the return will be linked to the rise in the consumer price index, so that the return earned can at least keep pace with inflation.

In fact, the ibond structure is simple and easy to understand. For example, it pays dividends every half a year, and the interest rate is linked to the average annual inflation rate of the composite consumer price index in Hong Kong. The principal of the bonds will be paid in full to the investors on the maturity date. This has opened up channels for many small investors to invest in bonds. After the ibond to be issued, silver bonds targeting the elderly aged 65 or above will be immediately followed. The total amount of issuance of the two batches of bonds is up to 13 billion yuan. If the subscription response is satisfactory, I will consider increasing the size of the issue. It can be said that, whether it is ibond, silver bonds, the Ministry of finance or retail bonds issued by different enterprises in Hong Kong, these products make capital financing and allocation more efficient, give citizens more investment options and promote the further development of Hong Kongs bond market under the premise of considering their own risk tolerance. Source: surging news editor: Yang Qian_ NF4425

In fact, the ibond structure is simple and easy to understand. For example, it pays dividends every half a year, and the interest rate is linked to the average annual inflation rate of the composite consumer price index in Hong Kong. The principal of the bonds will be paid in full to the investors on the maturity date. This has opened up channels for many small investors to invest in bonds. After the ibond to be issued, silver bonds targeting the elderly aged 65 or above will be immediately followed. The total amount of issuance of the two batches of bonds is up to 13 billion yuan. If the subscription response is satisfactory, I will consider increasing the size of the issue.

It can be said that, whether it is ibond, silver bonds, the Ministry of finance or retail bonds issued by different enterprises in Hong Kong, these products make capital financing and allocation more efficient, give citizens more investment options and promote the further development of Hong Kongs bond market under the premise of considering their own risk tolerance.