KBC, which specialises in convertible securities, equity and fund derivatives and structured credit products, is offering in Hong Kong two notes that could yield double the upside of the best performing share of specific Hong Kong-listed stocks.
The offer is available until 9 September. One product, the KBC blue diamond notes uses Cheung Kong, HSBC and Sun Hung Kai Properties as the underlying notes. The second product is called KBC red diamond notes and it uses PetroChina, Sinopec Corp. and China Mobile as its underlying notes.
For both notes the minimum investment is HK$10,000 or $1,000 and it is for at least one year, with a maximum of two years. The blue diamond note offers a fixed coupon of 6.5% for HK$ notes or 7% for US dollar notes in the first year. The red diamond notes offer a fixed coupon of 8% for HK$ notes or 8.5% for US dollar notes in the first year.
For both picks, if all three underlying equities in the notes close at or above their respective initial prices, investors receive 100% of their principal and the fixed coupon at the end of the first year. If the notes aren't redeemed in the first year, at the end of the second year investors can earn more.
For the blue diamond notes they can earn the higher of a 2% coupon or double the upside of the best performing share. The upside is capped at 4%. For the red diamond notes they can earn the higher of a 4% coupon or double the upside of the best performing share. The upside for this note is capped at 6%.
There is also a knock-out principal protection mechanism for both notes which works like this: on any trading day with the second year, if the underlying equities reach 105% of their respective initial price during trading hours, the notes become principally protected.
If the knock-out principal protection mechanism doesn't come into effect, one of two things could happen. At the end of the second year, if the underlying equities close at or above their respective strike prices on the final valuation date, then investors still receive back 100% of their principal. Otherwise, investors get the physical delivery of the worst performing share. The strike price is 95% of the initial price. Principal distributors include more than 14 banks in Hong Kong.
