Hong Kong airport operator's retail bonds take off on first day of sales, HSBC and BOCHK say

Airport Authority Hong Kong's (AAHK) highly anticipated HK$5 billion (US$640 million) retail bonds attracted a huge response when subscriptions opened on Wednesday, banks and brokers said.

In fact, demand for the notes matched the popularity of the Hong Kong government's green bonds issued in September last year, according to HSBC, Hong Kong's biggest bank and a co-arranger of the deal.

"Compared to the retail green bond issuance by the Hong Kong government last year, we received a similar volume of customer applications on the first day of subscriptions for the retail bond issued by the Airport Authority," an HSBC spokesman 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.

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"This reflects strong demand for safe investment options with a predictable income stream."

AAHK's 4.25 per cent, two-and-a-half-year notes will pay interest quarterly. Investors with as little as HK$10,000 can subscribe to the bonds from January 17 to 25. They can also request early redemption, which will allow them to get their entire principal as well as the interest due on the redemption date.

The bonds' interest payment is lower than the 4.75 per cent offered by the government's green bonds.

But the AAHK notes are priced attractively, said Arnold Chow, deputy general manager of the personal digital banking product department at Bank of China (Hong Kong) (BOCHK), another co-arranger of the deal. This is because interbank interest rates and time-deposit rates offered by banks have dropped since December.

At BOCHK, first-day subscriptions were satisfactory, as many investors wanted to lock in the interest rate ahead of an expected rate cut later this year, said Joyce Leung Mei-yee, an assistant general manager at the bank.

Futu Securities International (Hong Kong), ICBA Asia and Victory Securities also said demand on the first day of subscriptions was strong.

HSBC, BOCHK and other banks and brokers have offered a wide range of fee waivers for the AAHK bonds, which has also helped to boost sales. HSBC and BOCHK said that about 70 per cent of the subscription orders have been placed through the banks' digital channels, indicating a growing preference for online banking services.

The retail bond is the last leg of financing for the third runway at Hong Kong's airport.

Construction on the HK$141.5 billion project began in 2016, and initial operations started in 2022. The third runway is a key piece of infrastructure that will allow the airport to handle an extra 30 million passengers each year, and strengthens Hong Kong's status as an international aviation hub.

The runway is expected to be fully operational later this year.

When the Airport Authority announced its financial plans in 2016, the government decided not to use taxpayers' money so that it would not need the approval of the city's Legislative Council.

Instead, AAHK raised airlines' landing charges and introduced a levy of HK$180 each to be paid by departing passengers. It also decided to use its own savings, bank loans and bond issuances to finance the mega project.

The retail bond is aimed at allowing Hong Kong residents to participate in infrastructure projects, Julian Lee, executive director of finance at AAHK, said during a media briefing on January 5.

AAHK has also raised HK$89 billion from institutional investors and HK$17.5 billion in commercial bank loans, according to government data.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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