Hong Kong banks will start buying back soured minibonds guaranteed by collapsed Lehman Brothers from investors in early December, the city's banking association said yesterday.

Bank of China (Hong Kong), which is believed to have sold most of the minibonds and other Lehman Brothers products, said it will give appropriate compensation to investors if its investigation finds evidence of wrongful selling practices.

The Hong Kong arm of Bank of China said it will provide details about possible refunds as soon as possible.

Wing Lung Bank, another local lender that sold the minibonds, also said it will give refunds if wrongful selling is proven.

And the Singapore-based DBS Bank said on Oct 10 that it would let investors recoup some losses.

However, none of these banks have specified at what price the soured products will be bought back from investors. Linus Yip, a strategist at First Shanghai Securities, said: "Investors are unlikely to get back 100 percent of what they had banked; the value of those minibonds is shrinking in the second-hand market."

The exception, he said, would be if the bonds are found to have been sold by illegal practices.

"A task force of the Hong Kong Association of Banks (HKAB) has completed the phase-one mandate of the project, including the initial analysis on each of the structures based on the available data," the HKAB said in a statement, adding that the first batch of minibond buybacks will likely be conducted in December.

More than 40,000 Hongkongers bought Lehman-related investment products through banks, with the total outstanding value of the products estimated at HK$20.2 billion, according to the Hong Kong Monetary Authority, the territory's de facto central bank.

The majority of the investments, about HK$12.6 billion, are in minibonds.

The HKMA has referred to the Securities and Futures Commission 24 complaints of alleged misconduct by two unnamed local banks in their sale of Lehman-linked products.

(HK Edition 10/23/2008 page2)