The first leg of the week-long international roadshow in Beijing yesterday for Hong Kong's HK$20 billion (US$2.56 billion) global bond offer generated plenty of interest from mainland institutional investors - but it was not clear who would be allowed to buy.

Financial Secretary Henry Tang said that he was unsure which financial institutions or organizations are eligible to apply for the debt offering from Hong Kong, its first issue in more than a decade, according to Friday's China Daily.

"The policy is that there are some mainland organizations which are allowed to buy Hong Kong government bonds, but there are still some technical arrangements to be solved. When these arrangements are settled, they will be allowed to buy the bonds," he said in Beijing yesterday.

The offer from Hong Kong includes a US$1 billion 10-year tranche, and a HK$12 billion (US$1.53 billion) portion with maturities of two, four, five and 15 years. The two- and four-year tranches are reserved for retail investors in Hong Kong while the rest will be placed with institutional investors.

According to Tang, the institutional tranche will be priced on July 16, essentially leaving interested institutional investors with less than a working week to place their orders.

According to Tang, Hong Kong's decision to hold the first leg of its roadshow in Beijing holds a special meaning to the city as central government leaders had said previously that they would support Hong Kong's bond offerings.

Premier Wen Jiabao and his predecessor, Zhu Rongji, have reportedly said that the mainland would buy Hong Kong's government bonds.

Tang and his team will continue to talk to investors in Beijing today "to get market feedback" before heading to London, Frankfurt, Los Angeles, Boston and New York from July 12 to 14.

Meanwhile, subscription for the retail portion started yesterday at 1,100 branches of 23 placing banks in Hong Kong. The bonds will be priced on July 21, issued on July 23 and listed on July 26.

Analysts said that it's highly likely that the retail tranches will be oversubscribed and that it is also possible for the figure to hit HK$6 billion (US$760 million)."

The government said at the launch ceremony that it would try to raise a minimum of HK$100 million (US$12.8 million) from the retail portions but there is no cap set, as it wants to satisfy demand from investors.

Analysts also said that the bond offering from the government will not take the shine away from the stock markets as they are essentially targeting risk-averse investors.

"I don't think there will be much of an impact (on the Hong Kong stock market). The yields from the bonds are still lower compared to what investors can get from the stock markets," said Ben Kwong, director at KGI Asia.

(China Daily)