Six things you may not know about iBond

inSight

21 Jun 2016

Six things you may not know about iBond

(Translation)

Mina:

iBond6 is listed on the Stock Exchange of Hong Kong today. Have you applied for it?

Ronnie:

It’s a personal business matter, so I won’t tell you! But I can tell you six interesting things about iBond, which I bet you don’t know.

Mina:

I’m not that ignorant.

Ronnie:

OK. Let’s begin with a simple question – do you know why the bond is called “iBond”?

Mina:

Must be because of the popularity of iPhone! We followed the trend when naming the products.

Ronnie:

You really are ignorant, you know. iBond is the abbreviation for “inflation-linked retail bond”.

Mina:

I see, the “i” in iBond stands for “inflation-linked”.

Ronnie:

The next question is a technical one. How is iBond allocated?

Mina:

I do know the answer to this. There are three different scenarios pertaining to the allocation of iBond: The first scenario is where the bond is undersubscribed. In this case, all applicants will be allocated the full amount applied for. The second scenario is where more than one million people apply for the bond. In this case, the bond will be allocated by ballot, because the total issuance size is only HK$10 billion with denomination of HK$10,000 per unit. The third scenario is where the bond is oversubscribed but the number of applicants is not more than a million, which was the case of the previous six issues. In this case, the allocation process will be divided into cycles. In the first cycle, each applicant will be allocated the first unit. In the second cycle, if the quantity of remaining unallocated bonds permits, a second unit will be allocated to each of those who applied for two units or more. It goes until reaching a point at which the quantity of remaining unallocated bonds does not permit another cycle to be completed. At this point, the remaining unallocated bonds will be allocated by ballot, allocating an additional unit to each ballot winner. The biggest advantage of this approach is that everyone has an equal chance of getting an allocation of the bond, ensuring fairness to all applicants. In other words, your chances will not increase simply because you applied for more units of the bond.

Ronnie:

You’re certainly right this time Mina. Good job! But, do you know who designed this approach?

Mina:

No. Who is it?

Ronnie:

A “Tall Man” at the HKMA.

Mina:

?!

Ronnie:

The fourth question is also related to the allocation of iBond. I’m sure you know that multiple applications are not allowed. But, how do we ensure that all multiple applications are screened out?

Mina:

By using computers, of course!

Ronnie:

True. But when the iBond was first issued, in addition to verifying the identity of applicants with the aid of tailor-made computer programmes, to play safe, the HKMA assigned some 30 staff members to screen all the applications with the naked eye. With more than 150,000 applications received at that time, the staff had to screen some 5,000 applications each!

Mina:

This is in line with the spirit of being diligent indeed!

Ronnie:

It also fits in with the spirit of being careful! Here comes the fifth question – the HKMA did receive a complaint when the iBond was first launched. Can you guess what it was about?

Mina:

Was it something to do with the iBond allotment being too small? Or the interest rates too low?

Ronnie:

Neither. The story goes that a self-declared “worried husband” wrote to the HKMA saying that his wife working in a bank had to work overtime because of the preparatory work for iBond. In response to this, one of our senior officials wrote him a reassuring letter in person.

Mina:

How endearing!

Ronnie:

You mean the husband or the senior official?

Mina:

Both!

Ronnie:

Now, to the final question. There’s one recurring feature in the promotional materials for all six iBond series. Do you notice that?

Mina:

How would I remember something like that!

Ronnie:

Come on, you have to live up to your status as a specially-assigned ‘Observer’ at the HKMA! To make it easier, let me show you the promotional materials.

promotional materials

Mina:

Oh, I see…there’s an escalator in all of them! Does the escalator have any profound meaning?

Ronnie (shrugs his shoulders):

I am also clueless about the thinking behind the use of this mysterious escalator. You may have to find it out from the “Tall Man” at the HKMA.

Mina:

Do you know which floor he’s on? Do you think if I can take the escalator to find him?

Ronnie:

Well, you can try. Good luck!

 

Written by Ronnie and Mina, the two specially-assigned ‘Observers’ who go around the HKMA office in IFC, Central, collecting interesting facts and sharing them with you from time to time.

 

21 June 2016

 

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Last revision date : 21 June 2016