The Hong Kong Mortgage Corporation Limited (HKMC) is pleased to announce today (Monday) the launch of the debut issue under a new mechanism that enables retail investors to subscribe for the bonds through banks that are appointed by the Corporation as its placing agents. The HKMC signed the placing bank agreement with Dao Heng Bank, HSBC and Hang Seng Bank at the signing ceremony held this afternoon.
The new arrangement has substantially enhanced the issuing mechanism for the benefit of retail investors in the following areas:
(a) Multiple application channels: by appointing major retail banks as placing agents, retail investors can make use of the convenient and familiar phone and Internet banking facilities of these banks to subscribe for the retail bonds in addition to applying for the bonds in person in any of the 106 designated branches of the placing banks;
(b) More choices on tenor and return: the new mechanism allows the HKMC to offer, under separate tranches of the same issue, bonds in different maturities and yields to suit the needs of individual investors. The coming issue will be divided into two tranches, of 3-year and 5-year maturity, for selection by the retail investors;
(c) No cap on the issue amount: the HKMC has only specified a minimum amount of subscription of HK$50 million for each tranche for the issue to proceed. By not setting a cap on the maximum amount per application or the total issue size, the Corporation will have greater flexibility in accommodating the demands of retail investors;
(d) Assured liquidity through a formal market making arrangement: the three placing banks are committed to quoting firm bid prices for the retail bonds during business hours until the maturity date. This will ensure that retail investors can liquidate their holdings at any time. To facilitate the placing banks to also quote offer prices, an additional 20% of the total issue amount will be held in reserve for tapping by these banks to meet the demand of retail investors in the secondary market. The placing banks are committed to quoting firm offer prices until the reserve amount is exhausted and will continue to do so on a best efforts basis afterwards; and
(e) Low transaction cost: the placing banks will only charge 0.15% for handling the subscription of the retail bonds.
The issue will be divided into two tranches and their respective tenor and coupon are as follows:
Tenor Coupon per annum
3-year 3.5%
5-year 4.3%
The actual subscription price will be determined by reference to the relevant Exchange Fund Notes as specified in the Prospectus.
The subscription period will commence on 23 October 2001 and end at 12:00 noon on 1 November 2001. The timetable for the issue is set out in Annex 1. As applicants need to have a bank account and an investment account with the placing banks they intend to instruct, they are encouraged to submit their applications early and not to wait until the closing date of the subscription period. The subscription money will only be deducted from the applicant's account on the closing date.
Retail investors who are interested in subscribing for the retail bonds can obtain the prospectus from the offices of the HKMC and the 106 designated branches of the Dao Heng Bank Group, HSBC and Hang Seng Bank (see Annex 2), and the HKMC's website at www.hkmc.com.hk. A technical brief on the new issue mechanism and the retail bonds is attached at Annex 3.
Mr Peter Pang, Chief Executive Officer of the HKMC, said, "the current market conditions are conducive to promoting retail bonds. The new offering mechanism will make the subscription and trading of the bonds more convenient for retail investors. The market-making arrangement will give investors the comfort that they can liquidate the bonds, if the need arises, at any time prior to the maturity date. Offering the bonds in different maturities and yields provides flexibility to meet the different needs of individual investors. By not setting a cap on the individual application amount and the size of the issue, the HKMC will have greater flexibility in accommodating investor demand."
The Hong Kong Mortgage Corporation
22 October 2001
