iBond 2020｜The economist who guarantees a minimum return of 2%: 0 risk fixed oversubscription

Political situation

Written by: Zhou Lixi

2020-10-06 10:01

Last update date: 2020-10-06 10:01

The Monetary Authority announced the re-launch of inflation-linked bonds (iBond), which will be accepted for subscription on the 23rd of this month.

Financial Secretary Chen Maobo revealed yesterday that the new batch of iBond has a guaranteed minimum interest rate of 2%, with a term of 3 years, and a dividend payment every six months.

Economist Lin Benli pointed out this morning (6th) that the iBond launched by the government this time guarantees a return of 2%. It only needs 10,000 yuan to apply for subscription. It is expected to be oversubscribed by a lot. He believes that the government’s 15 billion yuan issuance is not enough. I believe that the 100 billion yuan of products issued by the government can be absorbed by the market. I believe that the government is not sufficiently aware of the citizens' demand for stable investment tools.

As for Financial Secretary Chen Maobo’s point that the government needs to be careful about future inflation risks, Lin Benli bluntly denounced Chen Maobo’s mistake, saying that the United States’ quantitative easing has been implemented for many years and the world is facing economic problems caused by demographic changes, such as the Japanese economy. There has been no improvement. Hong Kong should take advantage of the situation and think of ways to deal with it.

Financial Secretary Chen Maobo pointed out that the government needs to be careful about future inflation risks, and Lin Benli bluntly criticized him for thinking wrong.

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Lin Benli said on the radio program that assuming the government will not go bankrupt, iBond is a zero-risk investment tool. If it is held for a long time for 3 years or short-term speculation, there may be a return of 3% to 5%, and some products of the Monetary Authority can return. Less than 0.1%.

He called on the government to issue more retail bonds, saying that many of his friends hope to have stable investment tools, but the entry threshold for bonds is high, and many of them need 100,000 yuan to enter the market. Therefore, many citizens want the government to introduce more More stable products so that the public does not need to "speculate stocks every day."

The economy is expected to have no interest rate in the short term to approve relief measures such as "man-made deflation"

Lin Benli, when inflation is two percent, buying iBond is just to offset inflation.

However, he pointed out that the government's relief measures, such as free rent for public housing, will cause prices to fall. When deflation occurs, it will be very detrimental to the economy. We should consider using Macau to send consumer vouchers to stimulate the economy instead of "artificially creating deflation."

Lin Benli expects that because the impact of rent-free has already formed, even if there is inflation, it will not be as much as 2%. You can refer to the situation in the second half of next year. The current economic base itself is low, and there will be a chance to increase to 2% by then. It is impossible to return to 6% inflation.

Regarding the iBond this time, Lin Benli laughed and said that Hong Kong is already facing deflation, and that iBond is no longer worthy of its name because there is no inflation (Inflation).

Lin Benli said that pushing iBond would not burden the government

Lin also pointed out that the introduction of iBond is not a burden for the government, referring to the low interest rate environment and the decline in government reserves caused by the introduction of quantitative easing in the United States. The government will also have to deal with infrastructure spending in the future and should issue more bonds.

He believes that when the government has so much capital, it is easy to invest in high-return projects to make money. For example, the HKMA’s high-risk pools have done a good job in the past. Even the relatively conservative Exchange Fund has a 4% one-year return. If you make less than two percent in two or three years, you should not be a fund manager."

In terms of citizen investment, Lin Benli suggested that the government educate the citizens to diversify investment risks.

He explained that the Hong Kong stock exchange is dominated by various investment vehicles, but recently it includes many technology stocks.

He pointed out that technology stocks have a lot of risks, and there is a chance that they will fall sharply like a bubble burst in the technology and Internet stocks. Many investors in Hong Kong who are close to retirement should invest one-third of the stocks with higher risks and returns, and one-third for medium-risk and three-pointers. People invest in low-risk investment products with stable income, such as iBond.

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