Structured Products

Overview of Structured Products

Structured products have features which exchange-traded products do not have, such as quantity, strike price and expiration date etc. Structured products can also be designed according to investor's own views on the market and investment objectives. China Galaxy International can provide different product structure to achieve different investment objectives, such as directional participation like bullish and bearish, yield enhancement, strike price and principle protection.

 

China Galaxy International can provide structured notes issued by third-party issuers in response to client’s different investment objectives.

·Notes can be linked to different asset classes, such as Hong Kong stocks and U.S. stocks.

·Notes are designed according to client’s requirements.


Risks of Structured Products

During the investment period of equity-linked notes, investors are equivalent to holding bonds of the note issuers. If the note issuer defaults or bankrupts during this period, the investor will have to claim the money from the note issuer as a creditor. It is possible that part of or the entire value of the investment could be lost.

 

2. Price fluctuations of the underlying

The derivative feature of equity-linked notes is that ELNs generally sell put options linked to the underlying stock. Therefore, if the price of the underlying stock is lower than the strike price on the maturity date, the investor will purchase the underlying stock at the strike price.

 

3. Not equivalent to direct investment in underlying stocks

The investment in equity-linked notes is not equivalent to investing in the underlying stocks. During the investment period, investors will not have any rights to the underlying stocks, such as receiving dividends or exercising voting rights. If the underlying stock outperforms during the investment period, the value of the equity-linked note may not change accordingly, so its performance may lag behind the underlying stock.

 

4. Liquidity risks of equity-linked notes

If investors try to redeem the equity-linked notes earlier than the maturity date, they will need to request for early redemption from the note issuer.  However, the issuer does not guarantee that it will provide investors with a quoted price from the secondary market as equity-linked notes are traded over-the-counter and the market is not active as secondary market.


How to invest in structured products?