25 October 2016
The iBond pays you back about 4 percent of its price each year. The iPhone doesn't. Photos: Bloomberg, HKEJ
The iBond pays you back about 4 percent of its price each year. The iPhone doesn't. Photos: Bloomberg, HKEJ

Why the iBond 6 is better than the iPhone 6

Each HK$10,000 (US$1,287) chunk of the sixth batch of iBonds costs nearly twice as much as the iPhone 6, but it is likely to be a hotter product than Apple’s smartphone.

More than 600,000 Hongkongers are expected to subscribe for the government’s three-year inflation-linked retail bonds after they become available for subscription at 9 a.m. Tuesday.

Think about it: almost one in six working people in the city will subscribe.

Although Hongkongers probably have more iPhones than iBonds, I challenge you to find a better investment product.

Gone are the days when one could flip iPhones for easy money – as much as 100 per cent return in the first few days after they were released.

Now we have to be careful about what we buy.

Can one think of a blue-chip stock other than Tencent Holdings Ltd. (00700.HK), which, at its current record-setting pace, could overtake China Mobile Communications Corp. (00941.HK) as the biggest-cap company listed in Hong Kong?

Forget Li Ka-shing’s flagship firms – they have not been holding up well amid weak global markets.

What about renminbi deposits, the lazy way to wealth accumulation for many in recent years?

No, that no longer works since the renminbi started depreciating.

Thanks to the strength in the Hong Kong dollar resulting from its peg to the US unit, all other currencies have lost their luster.

Even the amazing run in gold has petered out ahead of the pending interest rate hike by the US Federal Reserve.

The average yield — based on the average inflation rate over the past six months – of the first three batches of iBonds was about 4 per cent per year. 

Although the average yield dipped below 3 per cent per year for the fourth and fifth batches, the increases in the prices in the secondary market resulted in an annual return of over 4 per cent.

What better way to hedge the constant increases in the bill for dinner at Cafe de Coral or Fairwood?

It is true that for every HK$10,000 of iBonds, you will get a return of only about HK$400 a year.

Most people will not be allotted more than HK$30,000 worth of iBonds, so why bother?

Because it is a sure win, just like the government’s other offerings, such as MTR Corp. (00066.HK), the Tracker Fund (02800.HK) and the Link Reit (00823.HK).

Senior citizens have it even better. A similar “silver bond” will be offered this summer.

On top of the 4 per cent gain, one can benefit from all the promotions our banks and brokerage houses offer to get your iBond business.

These offers include hundreds of dollars worth of supermarket coupons, cash rebates and discounts on jewelery, and no subscription and storage charges.

Sounds familiar?

Rest assured that the iBond is no Lehman Brothers mini-bond.

An investor does not have to fill in a risk profile questionnaire and listen to the standard 10-minute tape recording about the investment risks.

As an investment, the iBond 6 is nothing fancy – and that is why it could be as popular as the iPhone 6.

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EJ Insight writer

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