Inflation-linked bonds (iBonds) will officially go on sale next week. The iBond is designed to provide local residents with a reliable channel for individual investment that guarantees a return at least equal to the original value of the investment. It is a move seen to ease inflationary pressure on investors. As a means to counter balance inflation, relevant authorities should do their best to see that every one who has ordered the iBonds gets a helping hand.

It is the grass-root salary earners who are hardest hit by soaring prices. It is they who deserve government assistance most filling out orders and collecting papers, especially senior citizens and people with little education. Meanwhile, the authorities should seize this opportunity to develop the secondary bond market and divert the newly-formed huge cash pool into major infrastructure projects so that it will benefit the whole of society later.

iBonds have been around for quite a while in many countries because of strong demand for investment products that are low risk and value-friendly. At a time when Hong Kong is entering another cycle of high inflation rates with consumer prices soaring across the board, many local residents find their pay raises lagging far behind the increases in daily expenses. These people are in urgent need of assistance. Even for those who do have some savings, investment is risky business, given the volatile state of the stock market. That is why the iBond is expected to be very popular as a safe channel, offering security for the value of investment with flexible interest rates to offset inflation.

It should be noted, however, that iBond is a relief-oriented policy product involving government subsidy and therefore should avoid the situation where people in real need are excluded for one reason or another. If this issue turns out to be over-subscribed, the Monetary Authority should maintain a flexible approach to the amount of iBonds it issues and help senior residents and under-educated buyers complete the purchasing process.

This is a translation excerpted from a Wen Wei Po editorial published on July 6.

(HK Edition 07/07/2011 page3)