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Wednesday, May 22, 2019, 21:55
Strong debut for HK's first sovereign green bonds
By Oswald Chan
Wednesday, May 22, 2019, 21:55 By Oswald Chan

Hong Kong’s first sovereign green bonds have received a warm response from global institutional investors, with the first issuance more than four times oversubscribed.

Up to $1 billion worth of the sovereign bonds, with a five-year tenor, were issued, but orders exceeding $4 billion were received, the SAR government said on Wednesday.

The favorable response from global investors shows not only their recognition of Hong Kong’s credit strength, but also their support for the SAR’s determination and efforts to promote sustainable development and combat climate change.

Paul Chan Mo-po

Financial Secretary 

Orders came from more than 100 international institutional investors, with 50 percent of the bonds distributed in Asia, 27 percent in Europe and 23 percent in the United States.

Banks took up 29 percent of the orders, fund managers, private banks and insurance companies took 30 percent, while 41 percent went to sovereign wealth funds, central banks and supranational agencies.

The green bond carries a yield of 2.6 percent, representing a yield gap of 32.5 basis points with the five-year US Treasury bond.

The proceeds raised will be credited to the Capital Works Reserve Fund to finance public works projects that provide environmental benefits and support the sustainable development of Hong Kong.

Financial Secretary Paul Chan Mo-po said the government is pleased with the strong demand for its inaugural green bonds.

“The favorable response from global investors shows not only their recognition of Hong Kong’s credit strength, but also their support for the SAR’s determination and efforts to promote sustainable development and combat climate change,” he said.

Sean McNelis, co-head of debit capital markets for the Asia Pacific at HSBC, said the landmark transactions have established a green government benchmark in Hong Kong.

“They further support Hong Kong’s development as a leading green finance center, while the breadth and depth of the order book demonstrates the increasing maturity of green bond markets in Asia from the perspectives of both the issuer and investors,” he said.

The green bonds are expected to be settled on May 28, and listed on the Hong Kong Stock Exchange and the London Stock Exchange.

The government announced its first sovereign green bond issuance under the Hong Kong Government Green Bond Program early last year.

Last year, $11 billion worth of green bonds were issued in the SAR – up 2.37 times from a year ago. About 17 percent of the total issuances were by Hong Kong companies, with 83 percent issued by non-Hong Kong based entities.

oswald@chinadailyhk.com


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