If you buy a bond during its public offer, remember to read the offering documents or term sheets to help you better understand the bond's features. If you buy a bond in the secondary market, you should obtain the latest news and developments of the company (e.g., by way of visiting the bond issuer's website) in addition to reading the offering documents or term sheets.
Where can I find information on a bond?
When a bond is offered to the Hong Kong public, the issuer can publish the following information to help investors understand more about the offer.
- Awareness materials: These give you procedural and administrative information about an upcoming bond offer. This includes the name of the issuer, a description of the bonds to be offered, whether the bond is going to be listed on a certain stock exchange, and the dates and places where you can get the prospectus.
To draw the public's attention to an offer, awareness materials are released prior to publication of the prospectus. They can be disseminated through various channels such as brochures, newspapers, magazines, television, radio, Internet, ATM and telephone hotline etc. To ensure timeliness of the information, normally, awareness materials are not issued earlier than 14 days before the date of the prospectus for an offer in Hong Kong. Such materials should not be used after the close of the offer period.
- Fact sheets and mini-prospectuses: These publications summarise key information about the bond offer and provide cross-references to the prospectus. They aim to help you understand the information contained in the prospectus. These documents should only be issued when the prospectus is available to the public and must be read with the full prospectus.
- Prospectuses: These contain all the details of a bond offer, including the bond's structure, its pricing and subscription mechanism, its terms and conditions and financial and other relevant information on the issuer and the guarantor, if any.
Where an issuer has established a "programme" and offers bonds on a continuous basis or through successive tranches, the issuer may provide prospectus information in two or more separate documents. This would usually consist of a "programme" prospectus, which normally contains financial and other generic information of the issuer, risk factors, subscription, clearing, settlement and custody procedures, any market making arrangement, etc. For each bond issue, the issuer releases an "issue" prospectus, which provides specific information about that offer, such as the terms and conditions, timetable and application procedure, and may update the information contained in the programme prospectus.
The two prospectuses should be easily accessible by investors so long as the bond continues to exist. During the offer period, the programme prospectus should be made available with the issue prospectus or readily available at a specified alternative location nearby. A free copy should be given to an investor upon request. An issuer may also display these documents on its website, as well as the HKEx's, if the bond is listed on the Stock Exchange of Hong Kong.
Where a bond is privately placed, it is not intended to be offered to the public and a prospectus may not be available. In such cases, read the offering document or term sheet to find out the features of the bond. You may refer to the article "How do I trade bonds" for the differences between public offerings and private placements.
Prospectuses seem pretty bulky and complicated - what should I look for in them?
You can refer to the following sections to get a glimpse of the bonds' features and risks. However, before making an investment decision, remember to read the entire prospectus and seek professional advice where necessary.
- Where there is a key facts statement, it summarises the key features and risks of an investment product in plain and easy-to-understand language.
- The "Summary" section gives you an overview of the bond's basic features (minimum subscription amount, coupon rate, interest payment frequency, term, etc.), the pricing and subscription mechanism, whether the bond is guaranteed or not.
- Check the "Terms & Conditions" section. This tells you the bond's form (bearer, registered or book-entry form), denomination, title (who is considered the bondholder), interest payment and redemption procedures.
- Read the information about the issuer, such as an overview of its business, management and financial statements to understand its indebtedness, profitability and cash flow position. Look at information about the guarantor if there is one.
- "Risk factors" is a key section that highlights the risks which may affect the value of the bond, e.g. political and economic risks that may affect the operation of the issuer and weaken its financial soundness; the liquidity risk in the secondary market, etc.
- The prospectus will also tell you how the issuer uses your money from the sale of the bond.
Where can I get the latest information, such as the current price or yield of a bond?
- If a bond is listed on a stock exchange, the prevailing bid and ask prices, yield to maturity and certain static information, such as the bond's coupon rate and maturity date, are usually disseminated by the stock exchange through information vendors to the market. You can read such information on the relevant page of a trading terminal. Whether the media, such as newspapers and magazines, cover this information depends on the popularity of the particular bond.
- If the bonds are traded in the secondary market rather than on the stock exchange, the stock exchange will not disseminate their price and product information. You may obtain direct access to relevant information supplied by various financial information providers, or rely on your intermediary to get such information. Furthermore, the HKMA's Central Moneymarkets Unit Bond Price Bulletin Website provides investors with convenient online access to indicative bond prices quoted by major banks and securities firms in Hong Kong. Some intermediaries with bond trading services will also post bond price information on their websites.