The world's local bank
Capital Protected Investment Deposit (CPI) - Callable Interest Rate Movement
How it works
- The deposit provides a high fixed interest rate for the first quarter.
- In subsequent quarters, returns equals to a high multiplier on the quarterly movement of the US dollar 3-month LIBOR, subject to an interest rate cap and an interest rate floor.
- There are three types of structures suitable for customers with different views on the interest rate movement:
I. LIBOR-Up (i.e. Expect USD 3-month LIBOR will increase quarterly)
II. LIBOR-Down (i.e. Expect USD 3-month LIBOR will decrease quarterly)
III. LIBOR-Change (i.e. Expect USD 3-month LIBOR may increase and/or decrease from one quarter to another)
Example
| Choice 1: LIBOR-Up | Choice 2: LIBOR-Down | Choice 3: LIBOR-Change | |
|---|---|---|---|
| Deposit currency | US dollar (USD) | ||
| Deposit period | 1 year | ||
| Deposit amount | US$13,000 | ||
| Trade date | 16 June 200X | ||
| Deposit date | 20 June 200X | ||
| Maturity date | 20 June (200X+1 year) | ||
| Interest rate | |||
| Quarter1: | 8.00% p.a. | 8.00% p.a. | 8.00% p.a. |
| Thereafter:(Subject to the Interest Rate Cap and the Interest Rate Floor) | 20 x (USD 3-month LIBOR in arrears* - USD 3-month LIBOR in advance**) | 22 x (USD 3-month LIBOR in advance - USD 3-month LIBOR in arrears) | 12 x [Absolute value of (USD 3-month LIBOR in advance - USD 3-month LIBOR in arrears)] |
| Interest Rate Cap | 8% p.a. | 8% p.a. | 8% p.a. |
| Interest Rate Floor | 2.75% p.a. | 2.75% p.a. | 2.75% p.a. |
| Interest period | Quarterly | ||
| Interest payment | (Principal x interest rate / 4) for each interest period | ||
| Call feature | The deposit may be paid back early on any interest payment date at the Bank's discretion. | ||
* LIBOR in arrears refers, in respect of an Interest Period, to LIBOR as of two London Business Days prior to the Roll Date on which the next Interest Period commences.
** LIBOR in advance refers to LIBOR as of two London Business Days prior to the first day of the relevant Interest Period.
Risk disclosure:
- The above deposits are not the same as nor should they be treated as a substitute for normal fixed time deposits.
- The return in relation to a deposit will depend upon market conditions prevailing at the relevant fixing time(s) during or in respect of the relevant deposit period. The level of the underlying asset may go up or down during such period and this will affect the return. The return may be less than would have been payable on a normal time deposit for the same period.
- You must be prepared to risk the interest that might otherwise have been earned on money invested as a deposit.
- If the deposit is not in your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
- You should consider whether the products are suitable based on your risk appetite, investment experience and objectives. If you have any concerns about the products you should consult your professional advisers.
- This Structured Investment Deposit is a structured product involving derivatives. The investment decision is yours but you should not invest in Structured Investment Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
- This Structured Investment Deposit is NOT equivalent to a time deposit. It is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
- Issuer's Risk - you rely on HSBC's creditworthiness. The product is subject to both the actual and perceived measures of the credit worthiness of the Bank and there is no assurance of protection against a default by the Bank in respect of its payment obligations.
- In the worst case scenario (e.g. insolvency of issuer), the investor may get nothing back and the potential maximum loss could be 100% of investment amount and no coupon received.
