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Currency Linked Deposits

Scenario Analysis

Illustrative Examples of CLD

Deposit Currency and Principal HK$500,000
Linked Currency NZD
Deposit Tenor 1 week
Interest Rate 26.78%
Conversion Rate 6.2782

Normal Time Deposit

Principal Deposit Tenor Interest Rate (% p.a.) Interest Return Total Proceeds at Maturity
HK$500,000 1 week 0.01% HK$0.96
= HK$500,000 X 0.01% X 7 ÷ 365
HK$500,000.96
= HK$500,000 + HK$ 0.96

CLD in Different Market Scenarios

 
  Scenario 1 - Best Scenario Scenario 2 - Middle-of-the-road Scenario Scenario 3 - Loss Scenario
Theoretical Foreign Exchange Market on the Maturity Date NZD strengthens against HKD NZD weakens slightly against HKD NZD weakens significantly against HKD
Fixing Rate 6.2821 (Higher than Conversion Rate) 6.2688 (Lower than Conversion Rate) 6.2140 (Lower than Conversion Rate)
Principal HK$500,000
Interest Return Calculation HK$2,567.95
= HK$500,000 X 26.78% X 7 ÷ 365
Total Proceeds at Maturity HK$502,567.95
= HK$500,000 + HK$2,567.95
NZD80,049.69
= (HK$500,000 + HK$2,567.95) ÷ 6.2782 (Conversion Rate)
Total Proceeds in Deposit Currency on Maturity Date at Fixing Rate N/A HK$501,815.50
= NZD80,049.69 X 6.2688 (Fixing Rate)
HK$497,428.77
= NZD80,049.69 X 6.2140 (Fixing Rate)

Illustrative Diagram


Scenario 4 - Worst Case Scenario

If there is a substantial depreciation in the market value of the Linked Currency, the principal and interest to be repaid in the Linked Currency on the Maturity Date may become valueless. In the worst case, investors could lose the entire principal amount.

Scenario 5 - The Bank Becomes Insolvent or Defaults on Its Obligations

If the Bank becomes insolvent during the tenor of this product or defaults on its obligations under this product, investors could lose the entire principal amount and become an unsecured creditor of the Bank, regardless of the performance of the Linked Currency.

Note: The examples shown are for illustration only and shall not constitute any representation or guarantee by the Bank in respect of any possible gains or losses.

 

 

Risk Disclosure Statement

- Investment involves risks. The following risk disclosure statement cannot disclose all the risks involved and does not take into account any circumstances that are unknown to the Bank. The price of investment products may go up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying or selling investment products. Any past performance figures shown are not indicative of futures performance. Part of the investment may not be able to liquidate immediately under certain market situation. Customers should refer to relevant offering documents for detailed information, including but not limited to Risk Disclosures, prior to any investment subscription.
- The products described herein may not be suitable for all people. The decisions to invest are made by customers and customers should not invest in investment products unless the intermediary selling them has explained to them that the product is suitable for them having regard to customers' financial situation, investment experience and investment objectives. Customers should not make any investment decisions based on this document alone. Customers must make their own assessment of the information provided in this document. Customers should carefully consider whether any investment products or services mentioned herein are appropriate for them in view of their financial situations, investment experiences and investment objectives. If customers have any doubt about this material or any relevant offering document, they should consult their own independent advisers on the legal, regulatory, tax, investment and financial implications of the investments (including but not limited to estate duty and withholding tax and other tax obligations which may arise from local or foreign investment) as they deem appropriate to ensure that they understand the nature of the investments in order to consider whether the investments are suitable investments for them.
- Currency Linked Deposit is a structured investment product that involves derivatives. This product is not the same as buying the Linked Currency directly, and is not bank deposits and not protected by the Deposit Protection Scheme in Hong Kong. Customers are not allowed to withdraw the deposit before the due date. The amount of gain is limited to the pre-determined interest rate no matter how high the exchange rate of the Linked Currency has increased. Currency Linked Deposit is embedded with a currency option. Option transactions involve risks, especially when selling an option. Although the premium received from selling an option is fixed, you may sustain a loss well in excess of such premium amount. Your loss could be substantial. Investing in this product is subject to the credit risk of the Bank.
- Foreign currency investments are subject to exchange rate fluctuations which may result in losses. If the investment is denominated in a foreign currency or invest in assets denominated in a currency other than the base currency, you may face an exchange rate risk or exchange controls or any other restrictions which the return or amount you receive after redemption may be reduced. The fluctuation in the exchange rate of foreign currency may result in losses in the event that customer converts the foreign currency into Hong Kong dollars or other foreign currencies. If RENMINBI is involved in the investment product(s), offshore RENMINBI exchange rate will be quoted. The offshore RENMINBI exchange rate may be at a premium or discount to the exchange rate for onshore RENMINBI and there may be significant bid and offer spreads. RENMINBI is subject to exchange rate risk, RENMINBI is currently not freely convertible. Customers should be aware that they can conduct conversion of RENMINBI through bank accounts, for which it is subject to the requirements specified by the Relevant Authorities from time to time (the requirements may amend from time to time without any prior notice) the requirements specified by the Bank and/or the RMB position and commercial decisions of the Bank at that moment.

Important Notes
  • The information of this web page has not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authorities in Hong Kong.
  • The Bank classifies investment products into 5 levels, from the most conservative at "Low" to the most aggressive at "High". It consolidates an array of quantitative-measured market and non-market risk factors as well as a number of qualitative factors. The quantitatively-measured factors include currency risk, interest rate risk, equity price risk/commodity price risk/interest rate price risk and fund price risk whenever applicable, as well as credit risk, complexity risk, liquidity risk, and non-quantifiable risks including reputation risk, legal risk, and strategic risk. Qualitative factors include industry risks, economic and political environments, regulatory restrictions or expected developments, industry practices, and the Bank's own experience. Each of these factors may have a direct or indirect impact on a product's risk profile and its ultimate risk score. The ultimate risk rating is based on risk rating scale calculation as well as the Bank's professional judgement. The risk rating will be subjected to periodic review as well as ad-hoc basis review in case of material events triggering to ensure its appropriateness and effectiveness to demonstrate the risk level of the product.
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