HK officials get bored, play insurance salesmen

When it isn’t trying to mastermind the development of the city’s space-age whizz-bang IT-web-innovation-tech sector, the Hong Kong government and its numerous bureaucratic offshoots love to manage the growth and direction of the financial services industry. Among their many past obsessions are Islamic banking, Fintech (whatever it is), ‘green finance’ (ditto), and the endless Yuan offshore blah-blah stuff – all of a ‘hub’ nature, of course.

This hankering to out-do the private sector extends to offering actual retail investment products. Thus the (surplus-laden) Hong Kong government issues limited quantities of inflation-linked ‘iBonds’, giving lucky successful subscribers a higher yield than any bank deposit (or instant profit if they sell). The aim seems to be to make some small savers happy while spreading magic Asian Bond-Market Hub pixie-dust around the place.

Now, the government (in the guise of its HK Mortgage Corporation) is getting into the business of annuities. These are dreary retirement income products popular – I am guessing – among the sort of people who play golf. The benefit, presumably, is that they are easy to understand, at least as described by pushy insurance salesmen who make a ‘lifelong income’ sound somehow amazingly generous. In reality, since someone else is taking a cut, you would enjoy a better return if you invested the money yourself directly. Another drawback is that the lump sum is probably locked up.

As with the government’s iBonds, the HKMC annuities will be limited to a specific number of purchasers/amount of investment. The maximum investment would be HK$1 million, which would yield HK$5,800 a month – a big deal to those who can’t afford a million, but not worth bothering with for those who can. Still, the payout is 3-4%. If this is linked to inflation, it is a very good deal for the lucky subscribers, and bad for the rest of us who will no doubt subsidize it in some way. But it presumably is not index-linked, otherwise the officials unveiling the thing would mention it rather than refer to the returns as ‘fixed’ and ‘stable’.

By contrast, the Tracker Fund currently yields around 3%, which should more or less rise with inflation, and you can draw on the capital if you want, or leave it for your grasping heirs to enjoy after you go.

As with the iBonds, the initiative has no real purpose. It seems to be just another ‘thing’ for hyperactive, meddling bureaucrats to occupy themselves with while waiting for their handsome public-sector pensions.

In fairness to these particular officials, they can at least do their visionary work without launching real-estate projects. This contrasts with their colleagues’ efforts at the high-tech hub at Cyberport, with its special high-tech luxury apartments, the arts-and-culture hub at West Kowloon, with its (planned) special arts-and-culture luxury apartments, or the innovation-tech-Shenzhen-toxic-swamp hub planned for the Lok Ma Chau Loop, with, you can be sure, lots of special innovation-tech-toxic-Shenzhen-swamp luxury apartments.

For sparing us the Sukuk Bond Hub-Zone concept with special Islamic Banking luxury apartments, they deserve a bit of gratitude.

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9 Responses to HK officials get bored, play insurance salesmen

  1. Chinese Netizen says:

    Ah yes…I vaguely recall HK poised to be the Islamic banking hub of Asia, if not the universe, many years ago….

  2. Groucho says:

    It’s funny. I sometimes play a little game and see if I can forecast what you will be banging on about. I always win, except when I occasionally lose.

    I actually read whole sentences yesterday of the announcement of this Ponzi scheme in the SCMP ALIBABA. Surprisingly it got funnier the more I mistakenly skimmed it. Is Norman Chan a slant-eyed European or just another fake Anglophile Cantonese? Either way he’s a real car salesman. If you have read my second-to-last book THE HUI BOYS you would know that SHK nearly bought him but Raffy Hui got there first. The scheme is hilarious. Aged people give their life savings to get a pittance every month as long as they live. In Brazil they would have a hit squad to polish off the subscribers. In Hong Kong, the air does the trick. People deserve an old age pension for free after putting up with Hong Kong and people like Norman Chan and your own Bernard Charny Chan all their lives . Anything else is chicanery. But a good laugh all round. Unlike your perception of it.

    I am sitting in Stanley with a nice Shiraz, watching A NIGHT AT THE OPERA. You are festering in the Soho Triangle churning this stuff out. Buy yourself an annuity somewhere nice.

  3. WTF says:

    They forgot to play the new party anthem before the announcement, let’s fix that:
    Fuck the Poor – by Paul Chan Tim Minchen
    https://www.youtube.com/watch?v=ZqqOkmJaYKQ

  4. WTF says:

    Missed putting in a correction.

    If this is linked to inflation, it is a very good deal for the lucky subscribers, and bad for the rest of us those residents who don’t have off-shore income/hidden income. Someone other than the oligarchy/government officials who will no doubt subsidize it in some way.

  5. Stephen says:

    After three …

    The world’s freest economy.

    Coming soon Carrie Lam build’s wet markets in Tin Shui Wai the thwart the evil Link REIT (older reader may recall who conceived and created the Link REIT).

  6. dog likes walk says:

    Nitpick: the IRR of the annuity is 3-4%. The payout should be around 7%.

  7. Red Dragon says:

    Oh, where to start?

    Hemmers: Never knew that you were such a capitalist tool.

    Lonesome George: Don’t puff your “books”; they’re unreadable.

    WTF: WTF?

    Stephen: Grand Bauhinia Medal for best greengrocer’s apostrophe.

    dog likes walk: I’m lost.

    Chinese Netizen: I’m with you, honey.

    Thank God (figuratively) l’m elsewhere.

  8. LRE says:

    I love the wonderful tone deafness it reveals — as you say, $5,800 a month is basically chump change to anyone who has a spare $1m, but sounds hugely appealing to anyone who can’t. Nevermind that it will just get more and more laughable as inflation — driven largely by high rents and property prices — swallows up any slender benefit it might have represented.

    Yet our glorious leaders reckon a cheeky $1m is small enough beer even for the very poor: I mean that’s like 6 months fees at one of the cheaper golf clubs!

    They just don’t even live in the same Hong Kong as most of the population.

    @WTF
    I think, given the financial incentives, the Party Anthem is likely to be the more proactive “Kill the Poor”

  9. WTF says:

    LRE,
    The comfort of the Rich depends on keeping the poor alive and deprived, and to achieve that, an excess of demand and with no floor (both in income, and real floors (and roofs))is important.

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