HONG KONG (BLOOMBERG) - A popular investment among Asia's wealthy in the years of rock-bottom interest rates has been upended in the recent market rout, leaving investors facing losses estimated to be in the billions of dollars.. Read more at straitstimes.com.
HONG KONG - A popular investment among Asia's wealthy in the years of rock-bottom interest rates has been upended in the recent market rout, leaving investors facing losses estimated to be in the billions of dollars.
The products work well in a rising market or one moving sideways, where investors recover the initial investment and the coupon owed, which could be as high as 12 per cent per annum. But the interest-bearing notes, linked to the performance of underlying assets, open holders to the risk of steep losses if those assets fall below a preset level.
One Singapore-based financial services professional, who asked to remain anonymous, lost between 30 per cent and 40 per cent of the US$400,000 he invested in fixed-coupon notes tied to shares including Microsoft Corp, Broadcom Inc and India's ICICI Bank Ltd. The notes offered a coupon of about 10 per cent, paid quarterly with a one-year maturity.
New rules following the collapse of Lehman Brothers Holdings included narrowing the scope of qualified investors - who must have about US$1 million to invest in Hong Kong and US$1.4 million in Singapore - and categorising clients into different risk tolerance buckets. "We are seeing a mix of fear of missing out and fear itself - the allure of an annualised yield of 8 per cent to 10 per cent versus increasing risk aversion," said CFA Institute's Leung.
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