The Secretary for Financial Services and the Treasury, Mr Christopher Hui (center) hosts a press conference to announce the launch of a new batch of retail green bond under the Government Green Bond Programme for subscription by Hong Kong residents on Sept 5, 2023. (PHOTO PROVIDED TO CHINA DAILY)
The Hong Kong Special Administrative Region government will issue the second batch of retail green bonds for subscription by city residents, with the coupon rate set significantly higher than the inaugural issuance last year.
The target size for the upcoming retail green bond issuance is HK$15 billion ($1.91 billion). Depending on market conditions, the administration may consider increasing the issuance amount to a maximum of HK$20 billion. The retail green bond will have a tenor of three years, and bondholders will be paid interest once every six months at a rate linked to inflation in Hong Kong, or a minimum fixed rate of 4.75 percent, whichever is higher. The minimum subscription amount is HK$10,000.
The subscription period of the retail green bond will be from Sept 18-28. Hong Kong residents may make applications through a placing bank, securities broker or the Hong Kong Securities Clearing Co. The bond will be issued on Oct 10 and listed on the Hong Kong Stock Exchange on Oct 11, and can be traded in the secondary market afterward.
“Since the Government Green Bond Program started in 2018, we have so far issued close to $22 billion worth of green bonds involving various currencies across different tenors. These issuances were very well-received by investors and have achieved a number of breakthroughs, establishing important benchmarks for the market,” Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said at a news conference on Tuesday.
The Hong Kong SAR government’s inaugural retail green bond issuance in 2022 was well-received by the public and was the world’s largest retail green bond at issuance. Investors who subscribed to this batch of green bonds were paid a coupon rate of 2.5 percent.
“The issuance will further facilitate market development and at the same time promote financial inclusiveness, offering members of the public investment options with steady returns so that they can also participate in and benefit from the green finance development,” Hui said. “The issuance can enrich the green and sustainable finance ecosystem in Hong Kong, and showcase to potential issuers that Hong Kong can provide one-stop services and is the premier platform for issuance of green and sustainable financial products.”
Hong Kong Monetary Authority Deputy Chief Executive Darryl Chan Wai-man said, “We have determined the coupon rate based on a host of factors, including the market supply of and demand for green bonds, the prevailing market interest rates, the expectation of the future interest rate trend, Hong Kong inflation rate, global economic environment, and the 5-percent coupon rate level of the eighth batch of silver bond issuance in July.”
Arnold Chow, deputy general manager of Personal Digital Banking Product Department at Bank of China (Hong Kong), one of the joint lead managers of this green bond issuance, added: “As the interest rate level in Hong Kong and the United States is tipped to reach a peak in the near future, it is attractive for investors to lock in the coupon rate at 4.75 percent in the coming three years. We believe the issuance will be well received by investors.”
Wong Tsz-cheuk, head of Greater China FX Cash & EM rates trading at HSBC, who is the other joint lead manager, said the pace of US interest rate hikes may peak, but interest rates will not drop drastically in the near future.
The proceeds of the green bond issuance will be credited to the government’s Capital Works Reserve Fund to finance or refinance green projects with environmental benefits.
