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Press Releases

The 4th Non-competitive Tender for Exchange Fund Notes

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) that the 4th non-competitive tender for Exchange Fund Notes under the Pilot Scheme for promoting Exchange Fund Notes to the retail market will be held on 9 January 2004. Up to HK$120 million of an existing 5-year Note (issue no. 5703) with remaining term to maturity of about 38 months will be reopened and on offer for non-competitive tender. The issue will mature on 19 March 2007 and will carry interest at the rate of 5.16% per annum payable semi-annually in arrears. Interest payments and redemption payment on the issue are shown in the schedule attached as Appendix 1.

Investors wishing to participate in the non-competitive tender can apply for the issue between 30 December 2003 and noon 7 January 2004 through the Retail Exchange Fund Notes Distributors (Distributors) appointed by the HKMA, namely Bank of East Asia, DBS (HK) and Wing Lung Bank. The subscription price of the issue will be fixed and announced on 9 January 2004. Allotment will be done on 12 January 2004.

The upcoming issue on offer for non-competitive tender is a reopened issue and it bears two special features.

First, as the allotment date (12 January 2004) of the issue falls between two coupon payment dates, successful bidders will, in line with standard market practice, have to pay to the HKMA the subscription price plus an amount equal to the interest accrued from the last coupon payment date (18 September 2003) to the allotment date (12 January 2004) of the issue. The amount of accrued interest payable on the allotment date (12 January 2004) is HK$819.95 per HK$50,000 nominal value of the issue. This amount of interest paid will be recovered as part of the interest that the holder receives on the next coupon payment date of 18 March 2004 for the interest earned on the issue in the preceding six months (i.e. between 18 September 2003 and 18 March 2004).

Secondly, present indications are that the issue will be priced at a premium relative to the nominal value because the coupon rate of 5.16% is likely to be higher than the prevailing interest rate for a 38-month period. This arises because the coupon on a reopened issue was set when the Notes were first issued in the past, and the coupon can deviate significantly from current market interest rate. Normally, if the coupon on a reopened issue is higher than the prevailing market interest rate for comparable tenor, the issue will be priced at a premium to the nominal value. Conversely, Notes with a coupon lower than prevailing market interest rate will be priced at a discount to the nominal value. In this case, the 5-year Notes (issue no. 5703) to be reopened, bearing a coupon of 5.16% p.a., was quoted at 109.44 and yielding 2.14% on 22 December 2003.

The HKMA launched the Scheme on 1 August 2003 for a 1-year trial period whereby a portion of each quarterly issue of 2-year and 3-year Notes will be made available for non-competitive tender by retail investors through the Distributors. In addition, the Distributors will adhere to a number of unified standards in the distribution of Exchange Fund Notes to retail investors in the secondary market.

For further enquiries, please contact:
Jasmin Fung, Manager (Press), at 2878 8246 or
Kevin Ip, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
23 December 2003

Appendix 1

Schedule of interest payments and redemption payment of Exchange Fund Notes Issue Number 5703

For per nominal HK$50,000 of Exchange Fund Notes Issue No. 5703

Payment dates*Payment typesAmount* to be received by Notes holder
18 Mar 2004   HK$1,286.47
20 Sep 2004   HK$1,314.74
18 Mar 2005 Interest payments
@ 5.16% per annum on
HK$1,265.26
19 Sep 2005 nominal value of the Notes, payable semi-annually HK$1,307.67
20 Mar 2006   HK$1,286.47
18 Sep 2006   HK$1,286.47
19 Mar 2007   HK$1,286.47
  Redemption of nominal value of the Notes HK$50,000.00
     
  Total interest payments and redemption payment HK$59,033.55

*If the specified interest payment dates and redemption date of the Notes for any reason (e.g. typhoon) is not a business date, the relevant interest payments or redemption payment will be postponed to the immediately succeeding business day (other than a Saturday). The amount of the relevant interest payments will be adjusted to include the interest accrued during the deferred period.

Last revision date: 1 August 2011
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