Currency Linked Investment

Currency Linked Investment (“CLI”) is an unlisted structured investment product involving derivatives offered by the Chong Hing Bank Limited, an authorized institution under the Banking Ordinance and is a registered institution under the Securities and Futures Ordinance for carrying out Types 1, 4 and 9 regulated activities.

Before making any investment decision, you should take your own independent review on whether the product is suitable for you in light of your own financial situation, investment experience, investment objectives, investment horizon, willingness and ability to bear risks, and whether you understand the nature and risks of the product. If in doubt, you should seek advice from independent financial advisers.

This material is for reference only. It is not and does not by itself constitute any offer, solicitation or recommendation to buy, sell or provide any investment product or service.

The contents of this document have not been reviewed by the Securities and Futures Commission or any other regulatory authority in Hong Kong.

What is Currency Linked Investment – FX Swap?

What are the key risks?

Scenario Analysis

This is an unlisted structured investment product that consists of a cash investment (e.g. time deposit) of the Investment Amount in the Investment Currency and you are entering a FX Swap on the Linked Currency with the Bank.

How does CLI FX Swap work?

The FX Swap involves an initial exchange of Investment Amount in Investment Currency to an amount in Linked Currency at an Initial FX Rate on Investment Start Date, and final exchange of the Linked Currency Amount back into Investment Currency via Forward FX Rate on Maturity Date. The Forward FX rate is fixed at trade time.

The Investment Amount earns an Interest Amount, which is determined by reference to the Initial FX Rate, Linked Currency Interest Rate, and Forward FX Rate. The Initial FX Rate, Linked Currency Interest Rate and Forward FX Rate are fixed at trade time.

You will receive a Payout on Maturity Date which is the sum of Investment Amount and Interest Amount (calculated by reference to the Initial FX Rate, Linked Currency Interest Rate and Forward FX Rate which are fixed at trade time).

Characteristics of CLI FX Swap

Available investment currency: HKD, USD, EUR, AUD, NZD, GBP, CAD, JPY, CHF and CNH
Available linked currency: HKD, USD, EUR, AUD, NZD, GBP, CAD, JPY, CHF and CNH
Minimum investment amount: HKD 100,000 or its equivalent
Flexible investment tenor: From 7 days to 365 days
100% Principal protection if held to maturity
No early termination by the customer
Not callable by the Bank
Embedded derivatives: You enter a FX Swap on the Linked Currency to the Bank
Maximum potential gain: Limited to the interest amount, which is a fixed upfront amount determined by reference to the initial FX rate, linked currency interest rate and forward FX rate.
Maximum potential loss: Not applicable. Principal protection if held to maturity

How can you subscribe this product?

You can subscribe this product by visiting in person or calling any of our branches in Hong Kong, or through Internet Banking and Mobile Banking.

Product document

Important Facts Statement

*The above information is only a summary of the product features. Please refer to the "Important Facts Statement" for details. Terms and conditions apply.

The risks stated below are not intended to be exhaustive. You should consider all the risks associated with the Currency Linked Investment before deciding whether to invest. If you are in doubt, you should seek independent professional advice.

Not a time deposit – Currency Linked Investment is NOT equivalent to, nor should it be treated as a substitute for, time deposit. It is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.
Derivatives risk – Currency Linked Investment is an unlisted structured investment product embedded with a FX Swap entered by you on the Linked Currency as the investor. FX Swap transactions involve risks.
Limited potential gain – The maximum potential gain is limited to the Interest Amount which is calculated by reference to the relevant Initial FX Rate, Linked Currency Interest Rate and Forward FX Rate which are fixed at trade time.
Principal protection at maturity only – The principal protection feature of Currency Linked Investment is only applicable if it is held to maturity. If the Currency Linked Investment is early terminated, you may receive an amount which is substantially less than your Investment Amount. In the worst case, you will lose your entire Investment Amount and Interest Amount.
Not the same as buying the Linked Currency – Investing in this Currency Linked Investment is not the same as buying the Linked Currency directly.
Liquidity risk – Currency Linked Investment is designed to be held till maturity. You do not have a right to request for early termination of this product or request the Bank to close your position before maturity. You shall not assign, mortgage, transfer, dispose of, charge, pledge or otherwise encumber any of your title or interest of and in the Currency Linked Investment other than to the Bank.
Credit risk of the Bank – Currency Linked Investment is not secured by any collateral. When you invest in this product, you will be relying on the Bank’s creditworthiness. If the Bank becomes insolvent or defaults on its obligations under this product, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your Investment Amount and Interest Amount.
Currency risk – If the Investment Currency of the Currency Linked Investment is not in your home currency, and you choose to convert it back to your home currency upon maturity, you will be exposed to the exchange rate risks and you may make a gain or loss due to exchange rate fluctuations. The loss due to such currency conversion could offset (or even exceed) your gain from the Currency Linked Investment if the Investment Currency depreciates substantially against your home currency.
Early termination risk – The Bank may determine to early terminate a Currency Linked Investment before its maturity if the Bank determines that (i) a Termination Event occurs (such as an imposition of the foreign exchange control which restricts the convertibility or transferability of any of the Reference Currency Pair, or where it has become or will become illegal or impracticable under the applicable laws for the Bank to perform its obligations under the Currency Linked Investment), or (ii) an event of default in respect of you has occurred. If a Currency Linked Investment is early terminated by the Bank, you may receive an early termination amount which may be substantially less than your Investment Amount. See the section headed “Can the Bank adjust the terms or early terminate this product?” below.
Adjustment risk – Upon the occurrence of certain events (such as revaluation of any of the Reference Currency Pair or replacement of any of the Reference Currency Pair by another currency), the Bank may adjust the terms of the Currency Linked Investment to account for the effect of such event (such as substituting the original Investment Currency by another currency selected by the Bank). The adjustment as determined by the Bank may have negative impact on your investment under the Currency Linked Investment. See the section headed “Can the Bank adjust the terms or early terminate this product?” below.
Risks relating to Renminbi – If the Investment Currency or Linked Currency is CNH, the exchange rates of CNH against other foreign currencies (including Hong Kong Dollars) will fluctuate and will be affected by, amongst other things, the control directives, policy and/or measures from the Government of the People’s Republic of China (the “PRC Government”) on Renminbi from time to time. For example, the PRC Government regulates conversion between onshore Renminbi (“CNY”) and foreign currencies (including Hong Kong Dollars). Renminbi is currently not freely convertible. There is no assurance that disruption in the transferability, convertibility or liquidity of Renminbi will not occur.

In determining the relevant exchange rate under the Currency Linked Investment, you should note that the relevant offshore Renminbi (“CNH”) exchange rates in Hong Kong will be applied. Although both CNY and CNH are the same currency, they are traded in different and separated markets. As the two markets operated independently where the flow between them is highly restricted, CNY and CNH are currently traded at different exchange rates and their movements may not be in the same direction or scale. The exchange rate for CNH may be traded at a premium or discount to the exchange rate of CNY and there may be significant bid and offer spreads.

Concentration risk – You should avoid excessive investment (in terms of its proportion of the overall portfolio) in any single type of investment, so as to avoid the investment portfolio being over-exposed to any particular investment risk.

The following hypothetical examples are for illustrative purposes only. They do not reflect a complete analysis of all possible gain or loss scenarios and must not be relied on as an indication of the actual performance of the Reference Currency Pair or the Currency Linked Investment. You should not rely on the illustrative example when making an investment decision.

Example

The hypothetical example below is based on an investment in a Currency Linked Investment with the following terms:

Investment Currency: USD

Linked Currency: CNH

Tenor: 183 days

Reference Currency Pair: USDCNH

Initial FX Rate: 6.9600

Forward FX Rate: 7.0000

Linked Currency Interest Rate: 3.80% p.a.

Investment Start Date: 20-Apr-20XX

Maturity Date: 20-Oct-20XX

Investment Amount: USD500,000.00

Investment Amount	Initial FX Rate	Forward FX Rate	Linked Currency Interest Rate (p.a.)	Tenor
USD500,000.00	6.9600	7.0000	3.80%	183days

Scenario 1: Gain/Best case scenario

On Maturity Date, you will receive a Payout in the Investment Currency which is calculated as follows:

Payout on the Maturity Date = the Investment Amount + the Interest Amount in Investment Currency; which is USD500,000 + USD6,746 = USD506,746

Where:

The Interest Amount = Return Amount + FX Differential Amount; which is USD9,603.14 – USD2,857.14 = USD6,746.

Return Amount = [Investment Amount x Initial FX Rate x Linked Currency Interest Rate x (Tenor / 360)] / Forward FX Rate; which is USD500,000 x 6.9600 x 3.80% p.a. x (183/360)] / 7.0000 = USD9,603.14.

FX Differential Amount = Investment Amount x (Initial FX Rate – Forward FX Rate)] / Forward FX Rate; which is [USD500,000 x (6.9600 – 7.0000)] / 7.0000 = -USD2,857.14

Scenario 2: Worst/Default case scenario

Assuming that the Bank becomes insolvent during the Tenor of this product or defaults on its obligations under this product, you can only claim as its unsecured creditor. You may get nothing back and suffer a total loss of your Investment Amount and Interest Amount.