Sun Hung Kai Financial Group Launches Credit-Linked Mini-Bond for Retail Investors

Strategic Insights -

Sun Hung Kai Securities, the brokerage arm of Sun Hung Kai Financial Group, is rolling out a new fixed-income product, a credit-linked mini-bond, targeting retail investors. The multi-currency bond will be backed by the debt obligations of seven major companies, including Coca-Cola, IBM, and HSBC Holdings. This move follows the government's first securitised bond issue last month, which drew significant interest from investors. The three retail tranches of the $6 billion government bond issue were 3.12 times subscribed, receiving orders of $7.71 billion.

Key Takeaways:

  • The credit-linked mini-bond will be issued at par with a 5-year term, offering varying coupon rates for the Hong Kong dollar and US dollar tranches.
  • The bond will provide a higher coupon compared to the Hong Kong securitised bond, with a total yield of 4-4.75% per year.
  • The mini-bond carries a higher credit risk than the Hong Kong securitised bond, as it is tied to the debt obligations of seven underlying companies.
  • The mini-bond's credit risk is higher than that of corporate bonds issued directly by the underlying companies.
  • The issue has been lengthened to three weeks, starting from today, to give investors more time to subscribe.
  • The mini-bond is Sun Hung Kai's 10th such issue, with the first launched in 2002.
  • The product is designed to tap into the growing interest in fixed-income products among retail investors.

Statistics:

  • The $6 billion government bond issue, backed by toll-road revenues, was 3.12 times subscribed, with orders of $7.71 billion.
  • The Hong Kong securitised bond carries a sovereign credit rating, which implies a lower credit risk.
  • The call period for the mini-bond has been extended to three weeks, until [date].
  • The 5-year mini-bond will offer a varying coupon rate, with a total yield of 4-4.75% per year.
  • The credit risk of the mini-bond is higher than that of corporate bonds issued directly by the underlying companies.

Sources:

  • [Sally Leung, a manager of over-the-counter products at Sun Hung Kai Securities]
  • [Christophe Lee, the chief executive at SHK Fund Management]