Airport Authority retail bonds to be oversubscribed, BOCHK says, but HSBC reports only ‘favourable’ demand

Airport Authority Hong Kong’s (AAHK’s) HK$5 billion (US$640 million) retail bonds are expected to be oversubscribed, but have not generated as much buzz as the green bonds the Hong Kong government issued in September, banks and brokers said.

Bank of China (Hong Kong) (BOCHK), a co-arranger of the deal, said it had received a strong response for the AAHK notes, which it expected to be oversubscribed two times.

“BOCHK received the highest subscription numbers among all distributing firms, with every customer subscribing to HK$90,000 [worth of bonds] on average,” said Arnold Chow, deputy general manager of the personal digital banking product department at BOCHK. The bonds were priced attractively, as the market widely expects interest rates will fall this year, he added.

AAHK’s 4.25 per cent, two-and-a-half-year notes will pay interest quarterly. Investors with as little as HK$10,000 could subscribe to the bonds between January 17 and Thursday through banks and brokers. The bonds will start trading on the stock exchange on February 6, a day after their issuance.

However, HSBC – Hong Kong’s biggest bank and another co-arranger of the deal – said on Thursday that demand for the notes was only “favourable”. Last week, a spokesman said the lender had received a “similar volume” of customer applications for the Airport Authority notes on the first day of subscriptions as the green bonds.

“We have seen a favourable reception for the Airport Authority’s retail bond sale,” said Sami Abouzahr, head of investments and wealth solutions in the wealth and personal banking division at HSBC Hong Kong.

“This indicates a strong interest in diversifying their portfolios amid market uncertainty, and capitalising on attractive yields as interest rates peak.”

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Everbright Securities International received a significantly lower number of applications for AAHK’s bonds, as compared with the green bonds.

“The guaranteed rate of return for the government’s green bonds was 4.75 per cent, while that of the AAHK bonds is 4.25 per cent,” an Everbright spokeswoman said. The government’s HK$20 billion retail green bonds attracted 321,018 subscriptions, which raised the final subscription amount to HK$30 billion, according to government data.

“The higher return offered by the government green bonds could have made them more attractive to investors,” the Everbright spokeswoman added.

Both Bright Smart Securities and Futu Securities International (Hong Kong), with 6,000 applications for bonds worth a combined HK$350 million and about HK$400 million, respectively, saw a more lacklustre response to the AAHK notes as compared with the green bonds.

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Standard Chartered Bank, ICBC Asia, CMB Wing Lung Bank and China Citic Bank International said the response to the Airport Authority’s bonds was satisfactory.

The bonds, which represent the last leg of financing for the third runway at Hong Kong’s airport, are the first retail notes to be offered by the Airport Authority in 20 years.

AAHK has not yet announced the allotment results and said it will disclose these at a later date.