Hong Kong Mortgage Corp Issues Retail Bond

by Carla Johnson, Investors Offshore.com

05 September 2006

The Hong Kong Mortgage Corporation is launching a new retail bond issue with three series of notes, targeting investors who wish to save in funds for longer-term use.

The issue includes two series of Hong Kong Dollar notes of 2-year maturity (A) and 10-year maturity (C), and one series of US-dollar notes of 2-year maturity (B).

The interest for Series A and B notes will be paid semi-annually, while no interest will be paid for Series C notes as they are zero-coupon bonds.

Zero coupon bonds target long-term investors who do not need the cash flow from the interest payments on conventional bonds. By investing about HK$32,000 (US$4,114) in this zero coupon bond, the investor will receive HK$50,000 after 10 years. If investors need to sell the bonds before they mature, they are free to do so.

The minimum issue amount for Series A & C is HK$50 million each, and US$5 million for Series B.

The HKMC has appointed 17 banks as placing banks to distribute the issue to retail investors.

The bond issue is open for subscription between September 4 to 12. The issue date is September 18.

The placing banks will also perform the role of market makers for the issue to facilitate transactions in the secondary market.

The coupons of the three series are:

• Series A: 2 year - 4.38%
• Series B: 2 year - 4.88%
• Series C: 10 year - 0%

In October 2001, the HKMC introduced a mechanism to offer retail bonds through placing banks. So far, it has issued eight retail bonds for a total amount of HK$11 billion.

Speaking at the signing ceremony last week, the HKMC's Executive Director Peter Pang noted:

"The retail bonds offered today will provide the general public with an additional, relatively safe investment vehicle."

"I trust that our product innovation will also promote the development of the bond market in Hong Kong. This creates a win-win situation for the investors, the placing banks and the corporation."

Recommended