1. ECON 310 Financial Institutions
Section 1

2. Topic: The development of bond financing in Hong Kong

3. Group 1 Ray, Ho Lung Kei …… 033 165 Bong, Lee Ching Bong …… 033 167
Eric, Leung Ka Kit ……
Matthew, Shi Wang Tung ……
Alan, Yuen Wai Lun ……

4. 本節目純屬虛構

5. 投 資 男
Tau Zi Nam

6. MC : Matthew Shi
Guests : Alan Yuen (P.R. of HKMA)
Bong Lee (Representative of HKAB)
Eric Leung (Investment Expert)
Ray Ho (Investment Expert)

7. Hotline:

8. What is bonds?
debt instrument with the purpose of raising capital by borrowing.
a promise to repay the principal and interest on specified dates
without voting right

9. Situation of Bonds Market in Hong Kong
2002
2003
2004
Equity market
(Total market capitalization)
(million HK dollars)
3,559,099
5,477,670
6,629,176
Bonds market
(par value)
516,437
438,919
447,260
Source:

10. Situation of Bonds Market in Hong Kong
45.7%
$17,644.8
$71.8
160.3%
HKSAR
Source:

11. Situation of Bonds Market in Hong Kong
45.7% of GDP in 2003
Much smaller than other developed countries such as Japan, USA

12. Why does the bond market of Hong Kong are relatively small?
New Exchange Fund paper will only be issued when there is an inflow of funds
Hong Kong government seldom have deficit Unlike US government, the Treasury Bill are issued to solve the financial deficit
For private cooperation: complicated procedure and high cost of issuing bonds
Small investors hard to enter the market  needs a large amount of capital.

13. The needs of developing a bond market
Absence of a developed bond market causes volatility
Risks brought by the “Two-way traffic of investment flows”
Aging population calls for demand

14. Competitive advantage of Hong Kong market
The soundness of the financial system
the market economy
the high transparency of legal system

15. Three refinements of Exchange Fund Notes by HKMA
greater flexibility to select some specific issues
improvement of price attractiveness
strengthen the distribution network

16. Phone-in time 聽你地咁講， 投資債券好似唔錯喎， 不過我仲想知投資債券有咩前景呢，同埋投資前有咩要知架?
1st question:
聽你地咁講， 投資債券好似唔錯喎， 不過我仲想知投資債券有咩前景呢，同埋投資前有咩要知架?

17. What you need to know before buying a bonds?
Yield
Maturity day
Bond price
Coupon rate

18. Advantage of buying bonds
From the views of investors.
Take a stable return from your assets.
Enrich the investment portfolio, bare the risk, do not put your eggs in one basket.

19. Advantage of buying bonds
From the views of the government and companies.
Stabilize the financial market.
A extra fund sources.

20. Future of Hong Kong Bonds Market
Definitely Hong Kong Bonds Market will become bigger and bigger in the future.
With advantages under one country two policy and as a international financial Centre.
Hong Kong can play a role as a promoter of the bonds from China’s corporation.

21. How to buy and sell bonds?
IPO
Through recognized dealers and market makers
e.g.BANK OF CHINA, BANK OF EAST ASIA, HANG SENG BANK, HSBC
List of recognized dealers and market makers

22. Recommendation-EFN HKSAR (Exchange Fund) is the issuer
Minimum lot size of Exchange Fund Notes is HK$50,000. Tenders above this minimum must be in the multiples of HK$50,000.
6 benchmark tenors: 2-year, 3-year, 4-year, 5-year, 7-year and 10-year

23. Recommendation-EFN
Several EFN Recognized Dealers and Market Makers support, with different degree of commitments in primary and secondary markets.
With HKMA policies encourage investors to enter the bonds market helps the circulation of the bond notes enlarge the total bonds market in Hong Kong.

24. Phone-in time 咁多位，我見到D債券既介紹入面有D咩「Aa3」呀,「AA+」呀咁， 咩黎架? 同埋投資債券有冇風險架?
2nd question:
咁多位，我見到D債券既介紹入面有D咩「Aa3」呀,「AA+」呀咁， 咩黎架? 同埋投資債券有冇風險架?

25. Ratings Credit Risk Moody's Standard & Poor's Fitch IBCA Aaa AAA
INVESTMENT GRADE
Highest quality and lowest risk
Aaa
AAA
High quality (very strong)
Aa (1,2,3)
AA (+ -)
Upper medium grade (strong) and strong credit repayment A
Medium grade and enough ability to repay credit
Baa
BBB
*Under Aaa or AAA, in each levels of grading, e.g. Aa or AA, have been divided into 3 detail grading, (Aa1, Aa2, Aa3) and (AA+, AA, AA-)

26. Ratings Credit Risk Moody's Standard & Poor's Fitch IBCA Ba BB B Caa
NON - INVESTMENT GRADE
Lower medium grade (somewhat speculative) Ba BB
Low grade (speculative) B
LOW GRADE
Poor quality (may default)
Caa
CCC
Highly speculative Ca CC
Extremely poor prospects (have no repayment) C
In default D
*Under Aaa or AAA, in each levels of grading, e.g. Aa or AA, have been divided into 3 detail grading, (Aa1, Aa2, Aa3) and (AA+, AA, AA-)

27. BONDS PRICE = Issuer ABC Limited Coupon 7% Coupon Frequency (Per Year)
1 (annual)
Rating A3
Issue Date
Jun 1, 2001
Maturity Date
Jun 1, 2006
Currency
HKD
Redemption amount
100%

28. Risks Interest rate Risk Interest rate Bonds price Default Risk
Will issuers pay back the premium and interest?
Liquidity Risk
The bid/ask spread can jump up to 2%
Currency Risk
When the bond denominated in foreign
currency, it is subjected to currency risk

29. 節目重溫

30. 特別鳴謝:
Joe Wong
聲音演出:
賴越輝
江嘉豪
音響: 金陪達
攝影: 杜可瘋
美術: 奚中文
道具: 大力
場務: 長毛
監製: 史提芬周
投資涉及風險 債券價格及收益可升可跌 Always consider your limits and the risks you are willing to take when investing bonds.
以上內容為嘉賓個人意見 並不代表本台立場

31. SYC Broadcasts Ltd. © MMV http://www.syc.com.hk

32. MC Question 1 The minimum lot size of EFN is: $10,000 $30,000 $50,000
$70,000

33. MC Question 2 In 2003, the bond market of Hong Kong
equaled _______ of the GDP.
35.7%
45.7%
55.7%
65.7%

34. MC Question 3 Which of the followings is not the refinement by HKMA?
Greater flexibility to select some specific issues
Improvement of price attractiveness
Strengthen the distribution network
Increase the minimum lot size of EFN

35. Thanks for your kind attention!
The End
Thanks for your kind attention!