Important Risk Warnings
Structured deposit:
This is a structured product involving derivatives. The investment decision is yours but you should not invest in Currency Linked Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
Not a time deposit:
CLD is different from traditional time deposit in that it is a type of structured product investment that involves considerable risks. CLD is not the same as and should not be regarded as a substitute for traditional time deposit.
Not a protected deposit:
CLD is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
Unlimited downside risk:
CLD is not principal protected. The return of CLD depends on the market conditions prevailing at the fixing time on the fixing date. Customers may suffer a loss as a result of depreciation in the value of the linked currency. Such loss may offset the interest earned on the deposit and may even result in loss in the principal amount of the deposit. The linked currency credited to the Customer may be worthless in extraordinary circumstances and the Customer may lose all principal and interest of the deposit.
Return is capped:
The maximum return on CLD is limited to a predetermined amount of principal and interest even if the Customer´s view of the market movement of the linked currency is correct.
Market risk:
Investing in CLD involves market risk. The return of CLD is subject to exchange rate fluctuation. Currency exchange rates are affected by a wide range of factors, including national and international financial and economic conditions and political and natural events. The effect of normal market forces may at times be countered by intervention by central banks and other bodies. At times, exchange rates and prices linked to such rates may rise or fall rapidly. The related governments or authorities may impose exchange controls or other monetary measures without notice. These controls or measures may have an adverse effect on the convertibility or liquidity of a currency and may have unexpected consequences on Currency Linked Deposit. The Linked Currency credited to the Customer´s Settlement Account may be worthless in extraordinary circumstances and the Customer may lose all principal and interest of the deposit.
Insolvency risk:
The Customer investing in CLD faces Issuer´s Risk including reliance on Chong Hing Bank´s creditworthiness. The product is subject to both the actual and perceived measures of the creditworthiness of the Bank and there is no assurance of protection against a default by the Bank in respect of its payment obligations. In the worst scenario, such as arising from the insolvency of the Bank, the Customer may lose all principal and interest of the CLD.
Not supported by collateral:
The bank´s obligations under a CLD are not supported by any collaterals.
Liquidity risk:
The Customer may not withdraw CLD, or request the bank to close his/her position, before maturity. The Customer shall not assign, mortgage, transfer, dispose of, charge, pledge or otherwise encumber any of his title or interest of and in the Currency Linked Deposit other than to the Bank to secure the liabilities of the Customer or any other person in favour of the Bank as the Bank may agree from time to time. CLD will not be automatically renewed.
Concentration risk:
The Customer should avoid over concentration in investing in a type of investment product and/or particular issuer or counterparty.
No Post-sale cooling-off period:
Post-sale cooling-off period does not apply to CLD.
Not exhaustive:
The risk warnings contained herein are not and are not intended to be exhaustive in referring to all the risks involved.
Advice to The Customer
The Customer must carefully consider whether Currency Linked Deposit ("CLD") is suitable for his/her investment in light of his/her own financial position, investment objectives and the risks he/she agrees to bear before investing in CLD. The Customer is advised to seek independent financial and professional advice.
What is Currency Linked Deposit?
Currency Linked Deposit is a time deposit linked with a currency option. In addition to the ordinary time deposit interest rate, it gives investor an extra interest rate derived from the option premium obtained from the selling of a currency option.
Characteristics of CLD
Deposit Tenor: Flexible, normally range from 1 week to 1 month. CLD with bigger-sized principal (subject to change from time to time) may have deposit period up to 6 months. Invested amount cannot be withdrawn (wholly or partially) before the maturity date.
Various Currencies for selection: Many Currencies including HKD, USD, EUR, AUD, NZD, GBP, CAD, JPY and CHF for investor to choose and pair up.
Deposit Amount: Deposit amount can be as low as US$5,000 or equivalent.
Strike Rate: Investor may choose the Strike Rate and the Bank will provide the relevant Contract Interest Rate to him/her for reference.
Return: The final return of CLD depends on the relevant exchange rate prevailing at the fixing time on the fixing date. The fluctuation of foreign exchange rate before the fixing time will not affect the final return.
Fees and Charges: No fees or charges will be paid for investing in a CLD. All fees, charges, operational, administrative and hedging costs incurred by the Bank are already inherently contained and included in the calculation of contract interest rate of a CLD.
Role of Chong Hing Bank: Chong Hing Bank will act as principal in all CLD transactions.
Not a Protected Deposit: CLD is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
No Post-sale cooling-off period: Post-sale cooling-off period does not apply to CLD.
Target Investors
-
CLD is suitable to investors who:
- believe that the "Linked Currency" will appreciate against the "Deposit Currency" or the Fixing Rate is equal to the Strike Rate when comparing the Fixing Rate (the exchange rate of the currency pair consisting of the Deposit Currency and the Linked Currency at the Fixing Time on the Fixing Date) with the Strike Rate;
- are willing to hold either the Deposit Currency or the Linked Currency;
- are willing to take the exchange rate risk.
How to operate?
Step 1
Choose a currency as "Deposit Currency"
Step 2
Choose another currency as "Linked Currency"
Step 3
Select the Deposit Tenor
Step 4
Determine and Confirm with the Bank the "Strike Rate" and the "Contract Interest Rate"
Step 5
At 2:00pm or about 2:00pm Hong Kong time (as the Bank may reasonably determine with regards to prevailing foreign exchange market conditions) on the Fixing Date, the Bank will compare the "Strike Rate" with the relevant market spot rate ("Fixing Rate"):
Scenario 1: if (1) the Linked Currency has appreciated against the Deposit Currency or (2) the Fixing Rate is equal to the Strike Rate, investor will receive the Principal and the Contract Interest Amount in Deposit Currency on the maturity date.
Scenario 2: if the Linked Currency has depreciated against the Deposit Currency, investor will receive the Principal and the Contract Interest Amount in Linked Currency, being converted from the Deposit Currency at the Strike Rate, on the maturity date.
Enquiry
If you are interested in CLD or want to have more information, please contact the Head Office or any branch of Chong Hing Bank or call our Customer Services Hotline at 3768 6888.
Notice
All CLD transactions are subject to the Bank´s Investment Account General Terms and Conditions, Currency Linked Deposits Terms and Conditions and Account Rules, all as amended and/or supplemented at the Bank´s sole discretion which may be in force from time to time. Chong Hing Bank has taken reasonable procedures to ensure the accuracy of the information at the time of publishing this document. This document is for information only solely for reference purpose and does not constitute any offer, solicitation to invest, advice or recommendation.
