Hong Kong government worries about global water release risk and promotes HK $13 billion inflation linked bonds

category:Finance
 Hong Kong government worries about global water release risk and promotes HK $13 billion inflation linked bonds


According to the latest data from the census and Statistics Department of the Hong Kong government last month, deflation has occurred in Hong Kong from July to August, with the composite consumer price index (CPI) of - 2.3% and - 0.4% respectively on a year-on-year basis. In fact, the inflation rate from January to June has also dropped, which is a low level in recent years.

Despite this low inflation rate, it seems unnecessary to implement ibond. However, the financial secretary of Hong Kong, Mr. Chen maobo, said that the inflation risk was not to be ignored. He said that the global low interest rate environment will last for a long time, and the major overseas markets have launched monetary easing policies on a large scale, bringing about medium and long-term inflation risks.

Retail bonds promote the development of Hong Kong Bond Market

In fact, the launch of ibond was related to the global economic change of low interest rate and high inflation. Since 2011, the Hong Kong government proposed to implement ibond in the budget for the first time. The purpose is to provide Hong Kong citizens with an investment choice to cope with inflation. In addition, ibond is a kind of retail bond, and the Hong Kong government also hopes to develop the retail bond market in Hong Kong.

From 2011 to 2016, the government launched six batches of ibond. The fixed interest rate of the first six ibonds is only 1 percentage point, which is the minimum dividend level and fluctuates with the inflation rate of Hong Kong in the six months before the dividend. According to the actual dividend payout, ibond performed well, reaching more than 4% at one time, but after 2015, it dropped to less than 2%, and the lowest was only 1.02%. Chen said the ibond design has the advantage of taking both sides into consideration. If the Composite CPI is negative, ibond design has a minimum return guarantee to ensure that investors will not fall into zero return. In the impression of investors, bonds are usually sold by large wholesale institutions. However, there are many retail bonds targeted at small investors in Hong Kong. Chen maobo said that ibond, silver bonds, retail bonds issued by the Ministry of Finance and other enterprises in Hong Kong make capital financing and allocation more efficient. They also allow citizens to have more investment options and promote the further development of the Hong Kong Bond Market on the premise of considering their own risk tolerance. Source: responsible editor of 21st century economic report: Wang Wenhua_ NF5982

From 2011 to 2016, the government launched six batches of ibond. The fixed interest rate of the first six ibonds is only 1 percentage point, which is the minimum dividend level and fluctuates with the inflation rate of Hong Kong in the six months before the dividend. According to the actual dividend payout, ibond performed well, reaching more than 4% at one time, but after 2015, it dropped to less than 2%, and the lowest was only 1.02%.

Chen said the ibond design has the advantage of taking both sides into consideration. If the Composite CPI is negative, ibond design has a minimum return guarantee to ensure that investors will not fall into zero return.

In the impression of investors, bonds are usually sold by large wholesale institutions. However, there are many retail bonds targeted at small investors in Hong Kong. Chen maobo said that ibond, silver bonds, retail bonds issued by the Ministry of Finance and other enterprises in Hong Kong make capital financing and allocation more efficient. They also allow citizens to have more investment options and promote the further development of the Hong Kong Bond Market on the premise of considering their own risk tolerance.