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Friday, July 15, 2016, 18:59

Senior citizens offered Silver Bond

By Lin Wenjie

HONG KONG - Senior citizens aged 65 or above in Hong Kong will have an alternative investing option. The first batch of the Silver Bond, based on a guaranteed interest rate of 2 percent, will be opened for subscription from July 26 to August 8, for Hong Kong residents who were born on or before 31 Dec 1951, the Hong Kong Monetary Authority (HKMA) announced on Friday.

The maximum issuance size of the Silver Bond will be HK$3 billion ($387 million), and local investors may subscribe to the bonds in a principal amount that is an integral multiple of HK$10,000.

Similar to iBond, the Silver Bond carries a tenor of three years, and investors will be paid half-yearly interest at a floating rate linked to the local inflation rate for the six most recent months, or a minimum rate of 2 percent – one percentage point higher than the iBond.

However, different from iBond, the Silver Bond doesn’t have a secondary market and it will not be listed on any stock exchange. If bond holders want to sell the Silver Bond before maturity, they may only sell it to the government at the principal price, with accrued interest at a 2 percent fixed rate.

"There will be no secondary market for the Silver Bond. It is because we want to encourage senior investors to hold the bond for a long term. If they want to resell the bond just after they bought in, there’ll be no value-added space,” Treasury Secretary Ceajer Chan Ka-keung said in a media brief on Friday detailing the Silver Bond issuance.

He warned that eligible investors should consider their own capital flow in the next three years before subscription.

"The issuance of Silver Bond aimed to provide an investment product with steady return for senior residents in Hong Kong, and at the same time to encourage the financial institutions to tap into the potential demand of the silver market,” he said. “As a two years’ trial, we will issue the second batch of Silver Bond in January 2017 with details announced later.”

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