Hong Kong is to issue up to HK$10bn of inflation-linked retail bonds, dubbed 'iBonds', as it seeks to boost the development of the local retail bond market, it announced its budget today.
The administration initially plans to issue iBonds with a maturity of three years to local investors with interest paid to bond holders every six months at a rate linked to the inflation of the last half-year period. The plan is to provide Hong Kong residents with an investment option for coping with inflation, said financial secretary, John Tsang. Hong Kong's economy grew 6.8% in real terms in 2010 but rising inflation looms as a major issue to tackle in 2011, he said. Tsang also announced HK$18.4bn worth of one-off relief measures to help combat the impact of inflation and rising prices on people's livelihood.
He said another challenge for Hong Kong in 2011 will be the risk of asset-price bubbles, and the most effective solution to the property-market problems was ensuring steady and adequate land supply.