Download Hong Kong Debt Market Development

Retail Exchange Fund
Notes Programme
Eddie Yue
Executive Director
Monetary Management and Infrastructure Department
Hong Kong Monetary Authority
3 May 2005
Outline
I.
What are Exchange Fund Notes (EFNs)
II.
Benefits of investing in EFNs
III.
Terms of Upcoming issue
IV.
Timetable
I. What are Exchange Fund Notes?
• Fixed-income debt securities issued by the HKSAR
Government for the account of the Exchange Fund
• Bear fixed rate of interest (coupon rate), calculated on an
actual/365 day basis and payable semi-annually
• Tenor: 2, 3, 5, 7, 10 years
• Minimum Denomination : $50,000
• First issued in 1993, it has been actively traded among
financial institutions
EFN is a major segment in HK dollar
debt market
700
HK$ bn
50%
Exchange Fund Bills & Notes (LHS)
Other HK$ debt (LHS)
All Outstanding HK$ debt/GDP (RHS)
600
40%
500
30%
400
300
20%
200
10%
100
0
0%
91
Source: HKMA
92
93
94
95
96
97
98
99
00
01
02
03
04
II. Benefits of investing in EFNs
1. High credit quality
–
Issued by HKSAR Government Exchange Fund
2. Highly liquid secondary market
–
Retail EFN Distributors are committed to make quotes to buy
back the EFNs from their customers
3. Steady stream of income
–
The coupon on EFN is higher than HK dollar savings and time
deposits
Background of Retail Exchange
Fund Notes Programme
• HKMA first launched a 1-year pilot scheme in August
2003, with HK$ 330 million sold to retail investors
• New features to improve the attractiveness of EFN to
retail investors:
1. favourable allotment price (lowest accepted price
instead of average accepted price)
2. more distributor banks (increased to 7 from 3;
with more than 700 branches)
3. flexible selection of issues (consult distributors,
re-opened issues not used)
III. Details of Upcoming issue
•
•
•
•
•
Issue number : 2705
Tenor: 2 years
Tender date: 13 May 2005
Issue date: 17 May 2005
Issue amount: HK$ 300 million for non-competitive
tenders (Total issue size HK$ 1,200 million)
• Coupon rate: 2.6%
• Denomination: HK$ 50,000, or higher amount in
integral multiples thereof
IV. Timetable
• 4 May
• 11 May
• 12 May
• 13 May
• 17 May
Application commences at 9:00 a.m.
Application closes at 2:00 p.m.
Banks to submit applications to
HKMA
Tender date. Allotment price
announced
Issue date. Banks to notify
subscription result to customers