Purchasing and selling the Government Bonds

Distribution
  1. Where can I purchase the Government Bonds?
  2. How can I obtain information about new issues of Government Bonds?
Characteristics
  1. What is the minimum lot size of the Government Bonds?
  2. Are Government Bonds subject to tax?
  3. When will holders of Government Bonds be paid the interest normally?
  4. What happens if the interest payment date falls on a weekend or bank holiday?
Subscription
  1. How can investors subscribe for a newly issued Government Bond?
  2. What price will retail investors pay for subscribing for a new issue of Government Bonds?
  3. What are the transaction costs on subscribing for Government Bonds under the Retail Tranche?
  4. What if the Retail Tranche of Government Bonds are over-subscribed?
Transfer and holding
  1. How can investors hold Government Bonds?
  2. Can individual retail investors transfer their Government Bonds from one Recognized Dealer to another?
  3. How can individual investors trade Government Bonds in the secondary market?
  4. At what price will an investor’s instruction be carried out?
  5. What kinds of fees are charged by Recognized Dealers for providing the secondary-market trading services?
  6. What kinds of fees are charged by securities brokers or the HKSCC for providing the secondary-market trading services?
Selling a Government Bond
  1. How can individual investors sell their holdings of Government Bonds under the Retail Tranche before their maturity?
  2. Whom should individual investors contact if they have any queries on purchasing Government Bonds or their Government Bond holdings?

Distribution

  1. Where can I purchase the Government Bonds?

    You can conveniently purchase a newly issued Government Bond under the Retail Tranche through any of the Placing Banks, the Hong Kong Securities Clearing Company (HKSCC) or securities brokers admitted to participate in the Central Clearing and Settlement System (CCASS). In order to do so, a person must have a securities account opened with these institutions. Please contact your banker or securities broker to find out the procedures for purchasing Government Bonds. The Hong Kong Government Bonds are not available to US persons or residents of Canada.

    You can also purchase Government Bonds that are already trading in the secondary market through any of the Recognized Dealers of the GB Programme or securities brokers over the counter or on the Stock Exchange.

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Distribution

  1. How can I obtain information about new issues of Government Bonds?

    Investors can find out the list of Government Bonds to be offered in the coming six months in the tentative issuance scheduleissued by the HKMA. The schedule is usually released in the [first] and [third] quarter of a year.

    Before the commencement of subscription by retail investors, the HKSAR Government will announce in a press release the issue number(s), the subscription period, the issue date(s), the maturity date(s), the interest rate(s), a list of Placing Banks, and [the minimum and maximum issue amount(s)] of new retail bonds on offer for subscription. The announcement will be published on the Programme’s website at ww.hkgb.gov.hk, and/or by any other means specified by the HKSAR Government. Retail investors who are interested in subscribing for the bonds can obtain the Offering documents from the designated branches of the Placing Banks, the HKSCC, securities brokers, and [the office of the HKMA?]. Investors can also contact them directly or call their hotlines set out in the Information Memorandum for the Retail Tranche to find out more.

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Characteristics

  1. What is the minimum lot size of the Government Bonds?

    The minimum lot size of the Government Bonds is HK$50,000. Purchases above this minimum must be in integral multiples of HK$50,000.

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Characteristics

  1. Are Government Bonds subject to tax?

    There is no capital gains tax or interest withholding tax in Hong Kong.  The Government Bonds issued under the GB Programme are exempt from profits tax and stamp duty in Hong Kong.

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Characteristics

  1. When will holders of the Bonds be paid the interest normally?

    Interest will be calculated based on the coupon rate and will be payable semi-annually. The first interest period shall be the period from and including the issue date to but excluding the first interest payment date. Thereafter interest periods run from and including each interest payment date to but excluding the next interest payment date.

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Characteristics

  1. What happens if the interest payment date falls on a weekend or bank holiday?

    If an interest payment date falls on a weekend or bank holiday, payments will normally be made on the next business day.

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Subscription

  1. How can investors subscribe for a newly issued Government Bond?

    New issue of the Government Bonds under the Retail Tranche can be purchased by subscription at such time as the HKSAR Government may determine. Retail investors can apply for subscription through any of the GB Programme’s Placing Banks, the HKSCC or securities brokers during the subscription period.

    In order to instruct a Placing Bank, the HKSCC or a securities broker to apply for the Government Bonds on offer, an applicant must already have, or must open, a securities or investment account (or Investor Account in the case of the HKSCC) with the institution.

    [The HKSAR Government will not issue an application form for the Government Bonds.] Different Placing Banks, securities brokers and the HKSCC may have different arrangements for accepting and processing application instructions (including operating hours, application channels and payment and settlement methods), notification of the application results and future interest and principal payments. Investors should familiarise themselves with application procedures of the specific channel, and terms and conditions of the institution through which they intend to buy the Government Bond.

    Hong Kong-dollar Government Bonds are not available to US persons or residents of Canada.

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Subscription

  1. What price will retail investors pay for subscribing for a new issue of Government Bonds?

    Upon subscription of the Government Bonds, investors are required to pay the Application Price, plus a handling fee or brokerage fee. The actual price that investors are required to pay for Government Bonds allotted is the Subscription Price plus a handling fee or brokerage fee. Should the Application Price be higher than Subscription Price, the successful applicants will be refunded the relevant part of the application monies. Unsuccessful applicants will be refunded the application monies and the relevant handling fee or brokerage fee in full.

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Subscription

  1. What are the transaction costs on subscribing for Government Bonds under the Retail Tranche?

    Should subscription applications be made via a Placing Bank, retail investors will be charged a Handling Fee by the Placing Bank as stipulated in the Information Memorandum. If investors subscribe for the Government Bonds through the HKSCC or a securities broker, they will be charged a Brokerage Fee by the HKSCC or their securities broker as stipulated in the Information Memorandum.

    As the Government Bonds are scripless, the allotted bonds will be held in the investment accounts of investors’ chosen Placing Banks, securities or custodian accounts of investors’ chosen securities brokers, or Investor Accounts of the HKSCC. The Placing Bank, securities brokers or the HKSCC will charge a fee for opening and maintaining such accounts. Some may also levy different charges in relation to their provision of custodial, transfer and clearing services for the Government Bonds.

    Retail investors should be aware that their total return on an investment in Government Bonds will be affected by these fees and charges. They should consult the Placing Banks or securities brokers, or refer to the relevant rules published by the HKSCC, for the relevant fee level.

    The HKSAR Government and the Hong Kong Monetary Authority will not receive cash commissions or other rebates from any Placing Banks, securities brokers or the HKSCC in connection with the subscription of the Government Bonds.

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Subscription

  1. What if the Retail Tranche of the Government Bonds are over-subscribed?

    The HKSAR Government intends to allocate at least a minimum of HK$50,000 in principal amount of Government Bonds to everyone who applies. The remaining Government Bonds will then be allocated to investors approximately in proportion to the number of Government Bonds each investor applied for. If the new issue is so over-subscribed that it is not possible to allocate a minimum of HK$50,000 in principal amount of the Government Bonds to each applicant, a ballot will be held. All allocations will be made for each series of Government Bonds separately.

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Transfer and holding

  1. How can investors hold Government Bonds?

    Definitive Bonds, or certificates representing the Government Bonds, will not be issued to individual holders of Government Bonds. The Government Bonds are to be held through the securities accounts (maintained with the HKMA) of Recognized Dealers or CCASS (for those purchase Government Bonds through the HKSCC or securities brokers). Interest and redemption payments will be collected through the designated settlement account of the Recognized Dealers and CCASS.

    Individual investors who are successful in their subscription application must initially hold their interest in the Government Bonds allotted to them through their investment account with the Placing Bank, or Investor Account with the HKSCC or Securities Broker’s account in CCASS. If they subsequently wish to hold their Government Bonds through another Recognized Dealer or securities broker, they may need to instruct their institution to transfer their holdings to the relevant institution.

    Individual investors should be aware that Recognized Dealers (including Placing Banks and the HKSCC) and securities brokers may charge a custody fee for providing the custodian service of the Government Bonds. Some may charge a transfer fee for making transfer of Government Bonds to other custodians. They should ensure themselves familiar with the standard terms and conditions which their banks, securities brokers or the HKSCC will apply to their accounts, and the fees and arrangements for notification of application results and future interest and principal payments.

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Transfer and holding

  1. Can individual investors transfer their Government Bonds from one Recognized Dealer to another?

    Different Recognized Dealers (including Placing Banks and the HKSCC) may have different policies on allowing transfer of Government Bonds. Recognized Dealers allowing transfer usually charge a transfer fee. Individual investors should familiarise themselves with the transfer policy and charging scheme of the Recognized Dealer before subscribing to its service.

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Transfer and holding

  1. How can individual investors trade Government Bonds in the secondary market?

    Individual investors can trade any bonds under the GB Programme over the counter through Recognized Dealers or on the Hong Kong Stock Exchange through securities brokers, the HKSCC or banks which provide securities trading services.

    Buying and selling Government Bonds in the over-the-counter market: Individual investors can trade Government Bonds in the secondary market through Recognized Dealers which provide such services to individual investors. The Placing Banks which are listed in the offering document of the Government Bonds under the Retail Tranche have agreed to quote prices on a best-effort basis, while the Primary Dealers have committed to quote two-way prices for Government Bonds under the Institutional Tranche to help promote liquidity in the secondary market.

    Prices quoted by different Recognized Dealers may not be the same, and may be different from the last traded price of the Government Bonds on the Hong Kong Stock Exchange.

    Buying and selling Government Bonds on the Hong Kong Stock Exchange: Government Bonds are listed and can be traded on the Hong Kong Stock Exchange. The procedure for Government Bonds trading is the same as for stock trading. Individual investors can trade Government Bonds through their usual stock accounts. Like all debt securities traded on the Exchange, Government Bonds are quoted in units of HK$100 of their nominal value. The buyer of Government Bonds has to pay to the seller the accrued interest calculated from the last payment date to the settlement date.

    Individual investors need to be aware that listing does not ensure an active secondary trading market for the Government Bonds or that members of the public will have access to a firm bid price or a firm offer price for the bonds at a principal amount which they may wish to purchase or sell.

    Different Recognized Dealers, securities brokers and the HKSCC may have different arrangements for accepting and processing trading instructions, including operating hours, and payment and settlement methods. Investors should familiarise themselves with trading procedures of the specific channel through which they intend to trade the Government Bonds. They should note that settlement of any trades on the Exchange is required to take place in CCASS. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

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Transfer and holding

  1. At what price will an investor’s instruction be carried out?

    The price will be the market price available at the time of execution. The price of Government Bonds may fluctuate while the relevant instruction is in the post. The price may also fluctuate in the period after the banks or securities brokers have received the instruction but before it is executed.

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Transfer and holding

  1. What kinds of fees are charged by Recognized Dealers for providing the secondary-market trading services?

    The HKSAR Government does not set standards for the type and level of fees that Recognized Dealers may charge for providing secondary-market trading services. Individual Recognized Dealers may set such fees at their own discretion. In choosing a service provider, an investor should compare the quotes as well as the quality of service of different Recognized Dealers, and where necessary, seek independent financial and legal advice on the terms and conditions of the service offered by the Recognized Dealers. Investors should familiarise themselves with the charging schemes of service providers before entering into Government Bonds transactions.

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Transfer and holding

  1. What kinds of fees are charged by securities brokers or the HKSCC for providing the secondary-market trading services?

    A transaction levy and a trading fee are chargeable on both the buyer and the seller as stipulated in the Information Memorandum. Investors should note that settlement of any trades on the Exchange is required to take place in CCASS on the settlement day after the trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should consult their securities brokers regarding other fees or charges in connection with the provisions of secondary-market trading services on the Hong Kong Stock Exchange.

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Selling a Government Bond

  1. How can individual investors sell their holdings of Government Bonds under the Retail Tranche before their maturity?

    Individual investors can sell their holdings of Government Bonds under the Retail Tranche before maturity over the counter through Recognized Dealers or on the Hong Kong Stock Exchange through securities brokers, the HKSCC or banks which provide securities trading services.

    Over the counter: Individual investors can contact any Placing Banks listed in the offering document of their issue any time after the issue date to ask for a price at which they can sell their Government Bonds. These banks have committed to quote prices on a best-efforts basis. Individual investors can also contact any Recognized Dealers other than these Placing Banks to ask for a price so long as they provide such services.

    Prices quoted by different banks may not be the same, and may be different from the last traded price of the Government Bonds on the Hong Kong Stock Exchange. If the Government Bonds are not being held with the Recognized Dealer (including the Placing Bank) at which a retail investor wishes to sell to, he/she will need to transfer his/her holdings to his/her account with such Recognized Dealer beforehand. The individual investor should note that the Placing Bank, the HKSCC or securities broker may charge him/her a fee for such a transfer. He/She should familiarise himself/herself with the transfer policy and charging scheme of the Placing Bank, the HKSCC or securities broker.

    On the Stock Exchange: Individual investors can sell their Government Bonds on the Hong Kong Stock Exchange with procedures similar to those for selling stocks through their usual Investor Accounts with the HKSCC, accounts with securities brokers, or investment accounts with banks which provide such services. If the Government Bonds that an individual investor intends to dispose of are not held through such an account, he/she will need to transfer his/her holdings to his account with the HKSCC, the securities broker or the banks beforehand. The individual investor should note that the HKSCC, securities broker or bank may charge him/her a fee for such a transfer. Investors should familiarise themselves with the transfer policy and charging scheme of the HKSCC, securities broker or bank.

    Individual investors should be aware that trading price of Government Bonds will fluctuate depending on factors such as market interest-rate movements, the market for similar securities, and the market view of the credit quality of the HKSAR Government and the Government Bonds themselves. Furthermore, the trading price could be affected if there are only very few potential buyers in the market. If they wish to sell their Government Bonds before maturity, they may receive an offer which is less/more than the amount they invested; or they may not be able to sell their Government Bonds at all. They should also contact their banks, securities brokers or the HKSCC for the relevant settlement details. In particular, settlement of trades in the Government Bonds on the Hong Kong Stock Exchange is required to take place in CCASS. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

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Selling a Government Bond

  1. Whom should individual investors contact if they have any queries on purchasing Government Bonds or their Government Bond holdings?

    If individual investors have any queries, they should consult their bankers, securities brokers or other professional advisers as appropriate.

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