Key product features
- 100% principal-protected at maturity
Unless the issuer defaults, investors who hold the product to maturity will receive 100% of their principal, regardless of the performance of the underlying asset.*
- Potential for enhanced returns
The investment return or income is linked to the performance of the underlying asset, giving investors the potential to earn a higher return or income.#
- A choice of investment tenors, currencies and underlying assets
Investors can choose an investment tenor, currency and underlying asset—such as an interest rate or foreign exchange rate—that suit their investment objectives.
Principal-Protected Structured Notes example: Capped Floored Floater Note
A capped floored floater note is a structured product linked to the performance of an interest rate. It pays coupon every three months. The coupon is determined by reference to the performance of the underlying interest rate on each interest determination date, subject to a floored coupon rate and capped coupon rate. Unless the issuer defaults, 100% of the principal is protected at maturity. The minimum subscription amount is as low as HKD 1,000,000 or USD 100,000.
Illustrative example:
| Investment amount |
USD 100,000 |
| Investment currency |
USD |
| Investment tenor |
3 years |
| Underlying interest rate |
USD SOFR constant maturity swap rate 1 year |
| Capped coupon rate (p.a.) |
5.6% |
| Floored coupon rate (p.a.) |
4.7% |
| Coupon payment frequency |
Every 3 months |
Illustrative scenario:
Coupon scenario 1: Maximum coupon rate scenario
As illustrated on the diagram above, assuming on the 1st quarterly interest determination date, the underlying interest rate is at or above the capped coupon rate of 5.6%, the investor will receive the following coupon on the coupon payment date:
USD 100,000 × 5.6% p.a. × 30/360 = USD 1,400
Coupon scenario 2: Intermediate coupon rate scenario
As illustrated on the diagram above, assuming on the 2nd quarterly interest determination date, the underlying interest rate is between the capped and floored coupon rates of 5.6% and 4.7%, respectively, the coupon payable will be based on the underlying interest rate on that date. As such, the investor will receive the following coupon on the coupon payment date:
USD 100,000 × 4.88% p.a. × 30/360 = USD 1,220
Coupon scenario 3: Minimum coupon rate scenario
As illustrated on the diagram above, assuming on the 3rd quarterly interest determination date, the underlying interest rate is at or below the minimum coupon rate of 4.7%, the investor will receive the following coupon on the coupon payment date:
USD 100,000 × 4.7% p.a. × 30/360 = USD 1,175
Issuer default scenario:
If the issuer becomes insolvent or fails to meet its obligations, the investors may lose part or all of their principal.
* Before making any investment decision, please carefully read the warnings and risks set out in detail in the Indicative Term Sheet, Prospectus, Important Facts Statement, and Warning Statement.
# Investment returns or income may depend on the performance of the underlying assets, specific market events, or other specified criteria. For further details, please refer to the relevant supplemental terms and conditions of the individual product during the product subscription process (if applicable).
Risk Disclosure Statement
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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. |
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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. |
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Some issuers have a large portion of business, assets and operations are located outside Hong Kong. If you or your distributor or its direct or indirect custodian(s) (as the case may be) have obtained a judgment against them in a Hong Kong court upon a default of the issuers’ obligations under the product and their assets in Hong Kong are not sufficient to satisfy all the claims, you or your distributor or its direct or indirect custodian(s) (as the case may be) may have to enforce the Hong Kong judgment against their assets outside Hong Kong and may experience difficulties and delays in doing so or may not be able to enforce at all. If you are in any doubt, you should seek independent legal advice regarding this. In the worst case scenario, you could lose all of your investment. |
Investment risk
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Principal Protected Interest rate Linked Structure Product is a complex product and is an unlisted structured investment product embedded with derivatives. It is not as same as nor should it be treated as a normal time deposit or its replacement. It is not a protected deposit and it is not protected by the Deposit Protection Scheme in Hong Kong. |
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Although the product is principal protected, you may lose all of your investment if the issuer/ guarantor goes default and is unable to repay the obligations under the product in the worst case scenario. This product is not listed on any stock exchange and is not protected by the Investor Compensation Fund. |
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If you invest in the product that contain an early call feature, the issuer may at its sole discretion to early call the product prior to maturity. You may need to bear the re-investment risk. |
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The maximum potential gain of the product is limited, and the investment return is linked with the reference rate. If you invested in Principal Protected Interest Rate Linked Structure Product of specific product structure, you may not receive any coupon in the whole investment period. You should be aware that the reference rate may be subject to methodological or other changes which could affect their value; may cease to be published or no longer representative. Consequently, the relevant reference rate may be replaced by another reference rate. |
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Upon the occurrence of certain events, the issuer may in its sole and absolute discretion adjust the terms of the product to account for the effect of such event, which may result in (i) payment postponement; (ii) replacement of the reference rate; and/or (iii) early termination of the product. |
Credit and guarantor risk
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The product is not secured on any asset or collateral of the issuer. You are exposed to the credit risk of the issuer or guarantor and are constrained by the law and regulations of the related countries or regions. The product constitutes general, unsecured and unsubordinated contractual obligations of the issuer. The market value of the product can decrease significantly below its normal values as a result of the issuer’s or guarantor’s creditworthiness. If the issuer becomes insolvent or defaults on its obligations under the product or the issuer is not protected by Hong Kong legal system as it is located outside Hong Kong, in the worst case scenario, the issuer may fail to pay principal and interest on time, you could lose part or all of your investment amount. In addition, if any authority (e.g. government body or resolution authority) exercise the resolution power over the issuer (including but not limited to UK Bail-in power) and adversely affect the product, you could lose all of your investment. |
Repayment of full principal at maturity only
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A full repayment of principal is only applicable if you hold the product to maturity. |
Derivatives risk
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The product is embedded with interest rate option(s). 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, and your loss could be substantial. |
Liquidity risk
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The product is not listed on any exchanges and there is no active secondary market for the product and thus it may have no liquidity. If you would like to terminate your investment early, you may receive an amount that is substantially less than your initial investment amount or even cannot be sold successfully. |
Conflict of interest
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The issuer and its affiliates play different roles of the product. Potential or actual conflicts of interest may arise. |
Market risk
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There are many factors that affect the market value of the product. These include but are not limited to, changes of market interest rates, the financial condition of the issuer, the perceived credit quality of the issuer, the price performance and price volatility of the reference rate. |
Currency risk
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If the investment is denominated in a foreign currency or invests in assets denominated in a currency other than the base currency, you may be exposed to the risk of loss due to exchange rate fluctuations. 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 you convert the foreign currency into Hong Kong dollars or other foreign currencies. |
Secondary market risk
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In case you want to sell the product prior to the maturity date, the secondary market bid price, which reflects the market value of the product, may be substantially less than the capital invested. |
RENMINBI currency related risk
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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. |
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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 maybe amended from time to time without any prior notice) the requirements specified by the Bank and/or the RENMINBI position and commercial decisions of the Bank at that moment. |
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If it becomes impossible to convert RENMINBI from/to another freely convertible currency, or transfer RENMINBI between accounts in Hong Kong (or any other RENMINBI Settlement Centre), or to remit RENMINBI into or out of the PRC, or the general RENMINBI exchange market becomes illiquid, or exchange controls and restrictions applicable to the currency which cause the issuer to not able to obtain sufficient amount of RENMINBI in a timely manner, there is a possibility that the customers will not receive the full amount in RENMINBI upon redemption, or any payment of RENMINBI under the Notes may be delayed, or the Issuer may make such payments in another currency selected by the Issuer using an exchange rate determined by the Calculation Agent, or the Issuer may redeem the product making payment in another currency. |
Important Notes
- This is a complex product, you should exercise caution in relation to the product. If you are in doubt, you should seek independent professional advice.
- Investment involves risks, you may lose more than the invested amount. (If Applicable)
- The offering documents or information provided by the issuer have not been reviewed by the SFC and you are advised to exercise caution in relation to the offer.
- In the event of any discrepancies, the English version of the Warning Statement shall prevail.
- The information contained in this Warning Statement is provided for reference only and does not constitute any investment advice. You should read the offering materials and are advised to seek independent advice before making any investment decision.
- 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.
- The contents of the examples contained on this website (the "Examples") are for illustrative purposes only and do not constitute a solicitation, invitation, or recommendation to any person to purchase any structured note. The calculations and examples included in the Examples are purely hypothetical, do not constitute a complete analysis of all possible profit or loss scenarios, and should not be relied upon as an indication of the return at the maturity date of the structured note. For actual calculations, rounding conventions, and settlement and delivery fees, please refer to the relevant terms and conditions set out in the Offering Documents.
