Hi guys,

What's your thought about equity linked investment. I wanted to pull out funds from my equity market into government or corporate bonds, and the broker keep pushing this.

Note: Please analyze objectively and don't say all structured products are bad, though most are. ;-)

Equity Linked tied to both shares below
Tencent 0700.HK
Alibaba 9988.HK

Package
Airbag 80%
Coupon 16%
Early call 10%
Period 3 months

Which means that if I buy with principal 100 HKD of Equity Link Investment above, I get a coupon interest of 16% p.a. paid monthly, but if both Tencent and Alibaba drops below 80% of their shares I will get the share + coupon interest instead. The early call is whereby if the shares both goes up more than 10% the whole product will get exercised ahead in advance, and you get back the principal interest based on how much it has been going.

Scenario
1) Make money. Both shares go up more than 10% and early call is struck after trading, I get back principal (100 HKD) + interest period (16% p.a.)
2) Lost money. Both shares go down more than 20% and airbag is struck after trading, I get back share (now at 80 HKD or worse) + interest period (16% p.a.)
3) Make money. Both share go up less than 10% or down less than 20% the whole investment finished in three months, I get back principal (100 HKD) + interest period (16 p.a.)

Summarizing, I have a 36% range max (16% coupon upside + airbag downside protection which means it may go down to 20%), and unlimited downside but shares has to go down beyond 20% for it to take place.

Am I getting it right?

Appreciated your reply and perspectives, MD,... As of now, I'm not cutting loss and neither I'm averaging down yet,....Continuing to watch the national anthem debate closely and to see what will the US do by this wk....

locally this is call autocallable.

Main question is are you comfortable to own both shares at their current price?

Looks a like something out of an option strategy, I'm not that familiar with options, but I think it's called a short strangle strategy. Basically, u are betting that the stocks will not move outside that range, meaning it will not be as volatile. So if the stocks move a lot in the upside you lose a lot in the opportunity cost and if it moves a lot in downside, you also can lose.

Coupon rate of 16% pa, with 3 months maturity, means a 4% return.

I have mixed feelings about this product. Yield is quite attractive. But I imagine you are pulling out of equities because you have a bearish outlook. This doesn't protect you in a big bear market. On the other hand, these are also very good stocks.

Btw what sort of bonds are you looking at?

Yes, so it's 4% return for 3 months if the stock prices moves between 80% - 110% of my original principal, but if it goes down more than 80% I have to take the hit and take the stocks, which by now has only 80% or even lower compare to my principal.


Currently the practicals ones I can get hold of are Singapore Government bonds, corporate bonds or US T bills.

1) Singapore bonds - subscribed via banks in SG. (HK gov bonds seems to be very low and I am not interested to accumulate more HKD as I already have)
2) Corporate bonds - blue chip companies issuing debts, right now there are still companies giving out 4% bonds with a few years maturity, but I have not sold bonds in secondary markets so I am not sure about slippage or volatility, I am guessing there shouldn't be.
3) T bills - maybe just buy via Vanguard or something, since I don't know how to buy T bills directly, and Vanguards fees are cheap enough.

This post has been edited by simplylegendary: May 27 2020, 04:36 PM

no lah this is not a strangle, more of a sell put option. worst case scenario is he will be assigned with the stock at strike price if price ever fall below knock in -20% and still remain below strike price upon maturity.

China approves Security Law!

https://www.bloomberg.com/news/articles/202...n-defying-trump

China seems to have think through their action and impacts when they approves the Security Bill and they are prepared for US's response whether weak(talk no action) or strong (walk the talk)...

For those who have investment in US as this will affect its market, interesting article below:


“The profit-seeking nature of capital determines that China is still one of the most sought-after markets,” he said. “Whoever loses the Chinese market will lose the future.”

https://www.washingtonpost.com/world/asia_p...0385_story.html

Bros,.... heads-up,.... I mentioned something abt this earlier,.. but no panicking yet,.. it has not happened,...yet ?,....

U.S. Hedge Fund Bets on Hong Kong Dollar Peg Collapse

One of the largest Beijing bears in the hedge fund industry, Kyle Bass, has reportedly set up a strategy with 200 times leverage betting on the collapse of a peg installed at the current range since 1983.

Dallas-based Hayman Capital Management set up the fund using options contracts to achieve the 200 times leverage, according to a «Bloomberg» report citing unnamed sources. The strategy is designed to generate major gains if the Hong Kong dollar weakens against the U.S. dollar beyond the peg and up to a complete loss, if not. The strategy is investing based on an 18-month time horizon.

The new fund includes a two-year lock-in and a one-time management fee of 2 percent. If net returns exceed 100 percent, a 15-20 percent performance fee will be added.

Bass reportedly told investors that a 64-fold return could be achieved if the currency declines by 40 percent.

Foreign Currency Demand

The current peg is based on a narrow trading band of one U.S. dollar to 7.75-7.85 Hong Kong dollars. The Hong Kong Monetary Authority has continually provided assurances about its will to defend the peg and even stated that a currency swap line with China was at its disposal if required.

«The uncertainty will likely create capital changes, or at least like what we saw last year, where some HK dollar deposits are converted into foreign currencies,» said Frank Lee, an investment strategist with DBS, though he added that there was no real impetus for outflows.

Indeed, money changers were reportedly overflowing with business as Hong Kongers rushed to convert their local currency into greenbacks also because of a bearish view on the peg. One owner of a small shop claimed he unwillingly turned away 600 customers after weekly demand increased 10-fold earlier this month.

Beijing Bear

Bass’ initial success was based on successfully predicting and betting against the U.S. subprime mortgage crisis via credit default swaps. Since then, he has been a Bass is a vocal critic of Beijing and has also made related bearish bets, though they did not fully materialize, for example, on the yuan.

His newly established strategy – one he claimed was inspired by Hayman Capital’s largest client who was not named – marks a historical milestone of sorts, as it would join George Soros and his 1997 attempt to do the same though ultimately failing due to a very determined central bank in Hong Kong at the time.

Still, markets are currently not expressing full confidence. Options data from Bloomberg indicate that markets are pricing a 6 percent chance that Hong Kong dollar will break the peg and the 7.90 level in 12 months.

The HK thread has been quiet..

Tencent is now the highest valued stock in Asia.

https://www.bloomberg.com/news/articles/202...nd=premium-asia

A great stock up 40% in 1 year, even with covid, trade war and HK protests.

This post has been edited by Cubalagi: Jun 23 2020, 08:11 PM

For me i just tighten my seat belt and enjoy the uptrend.
As usual, tencent the king of hk stock my favourite all the time.
If one want add more fund in hkse can consider Alibaba, JD both another good choice.

Meituan Dianping (3690) is another tech champion.

Does anyone own Vanguard Total China Index ETF (3169.HK).

Considering because of the AUM and low ER. Also because it invest across all type of China shares ( A shares, H, P chips etc).

No, but you won't go wrong with a Vanguard ETF. If it is the broadest China exposure that you want, then this is good.

Thanks Cubalagi, always helpful

I've taken a look at the 2822 and 2823 you mentioned, they are good but two issues
1) not all market, as they tracks A50 companies, which is listed on Shanghai and Shenzhen. Still very good but 3169 takes it one step further even by tracking all major Chinese companies which is listed anywhere.

2) Expense ratio, I think 2822 and 2823 are higher.

It depends on your strategy on what type of China exposure you want. If you want the broadest and diversified one, the Vanguard is good.

If you want more targeted approach then there are others. For eg you might be nervous about having China stocks in US n HK for fear of US retaliation, then mainland only makes sense. bcoz it's quite insulated.

This post has been edited by Cubalagi: Jul 2 2020, 11:59 AM

China n HK so bull today!

If China retail investors start come in, then things can go really crazy.

The party already started.

For those want chase high can consider place a bit on insurance sector, automotive.

This post has been edited by foofoosasa: Jul 7 2020, 05:44 AM

https://www.cnbc.com/2020/07/06/china-stock...tate-media.html

Bbb

Also HKMA pumps HKD1.744B into the market...