Do You Have RM3 Million In Assets? Qualify To Invest In 1-Year MYR Autocallable Equity Linked (Volkswagen AG) Structured Investment-i

Posted by Kris | Tuesday, September 11, 2012 | , | 5 comments »




I received an email from HSBC on this structured investment. Well, honestly I never heard of the term "Autocallable Equity Linked Structured Investment". Sounds very technical in terms of financial jargon. This piqued my interest to know about it. By looking at the prospectus below, if you are a plain normal investor, it is hard to determine what the conditions really mean when you are vested in it.

Disclaimer: I am not an expert on this subject matter, I just googled on it. I am just a curious guy. SO don't shoot me if my statements are inaccurate. I may just be plain wrong :P  If you know more about these type of investments, do share with us in the comments section. 

From my basic understanding, it is a "structured" investment that consists of a bond and call option feature. In short, you are hoping that the underlying reference aka Volkwagen's price share goes up and you get paid "interest" monthly if the price stay at a certain price point. If at one, point the share goes rocket to the moon, you will not benefit as much (your structured investment will be auto-redeemed) as it compared to if you buy the equity share directly from the stock market. That is why it is called auto-callable.


Here are explanations:



This is your opportunity to potentially reap returns based on Volkswagen AG’s (underlying reference) performance on the Frankfurt Stock Exchange through the 1-Year MYR Autocallable Equity Linked (Volkswagen AG) Structured Investment-i2.
  • Potentially earn 10%3 annualised anticipated profit payable monthly if the underlying reference performs consistently at or above 68%4 of its initial level at each monthly observation date. If the underlying reference performs consistently below 68%4 of its initial level at each monthly observation date, annualised anticipated profit payable monthly is 5%5.
  • If the underlying reference performs at or above 102%6 of its initial level at any quarterly observation date, the investment will be auto-called and 100% of the principal amount is expected to be paid to the investor.
  • If there is no auto-call, the amount expected to be paid to the investor at maturity could be less than 100% of initial principal amount invested if the performance of the underlying reference touches or dips below 68%4 of its initial level and does not recover to its initial level on maturity.
  • This investment is compliant with Shariah principles.

Invest in the automobile sector today!
Minimum investment amount: RM50,0007 or RM250,000 
Investment tenor: 1 year
Investment in this Structured Investment-i is open from 6 September 2012 – 13 September 2012.

Source:
      1)  Volkswagen Group Half Yearly Financial Report, January, June 2012.

    2) This Structured Investment-i is eligible for protection by Perbadanan Insurans Deposit Malaysia (PIDM) and it is known as “1-Year MYR Non Principal Protected Autocallable Equity Linked (Volkswagen AG) Structured Investment-i” in all investment documentation.


    3) 10% annualised or 0.834% per month is indicative only and will be determined on Trade Date of the Investment, if this Investment is finalised and launched. The Investment will not be launched if this anticipated profit rate cannot be set at least at 8% annualised or 0.667% per month.


    4) This Barrier Level shown above is indicative only and will be determined on Trade Date of the Investment, if this Investment is finalised and launched. The Investment will not be launched if the Barrier Level cannot be set at or below 78%.


    5) 5% annualised or 0.417% per month is indicative only and will be determined on Trade Date of the Investment, if this Investment is finalised and launched. The Investment will not be launched if this anticipated profit rate cannot be set at least at 4% annualised or 0.333% per month.


    This Autocall Level is indicative only and will be determined on Trade Date of the Investment, if this Investment is finalized and launched. The Investment will not be launched if the Autocall Level cannot be set at most at 110%.


    Applicable for individuals with a declared total net personal assets exceeding RM3,000,000 only.

    Another note is that I don't have RM3 Million in assets, so this out of my league :D (This is purely educational)


Digg Technorati del.icio.us Stumbleupon Reddit Blinklist Furl Spurl Yahoo Simpy

5 comments

  1. Mr Lonely // 11:38 PM  

    thanks for this info but no $$ invest.. sad

  2. maveric // 8:50 PM  

    Ha,Ha,Ha

    Why do they want rm3mil in asset from a prospective investor if the min investment amount is rm50k or rm250k other than a reverse psychology to make you feel important/temp you to go in..!

    I was involved..!(but not in this VW scheme but in a similar parameter for a supposed 24 months contract.)

    It sounded so simple in their explanation and the finer points were never explained in details...

    Hypothetically..let's say you go in @$0.93 & 'autocall' will be triggered once the price reach $1.00 ie up 7% ( the structured investment scheme stop & you take back your invested amount ) There is also a 'knock-off' level which in my case was $0.60 ( well..you lose your pants off if this level actually occurred at ANY DAY within the 24 months period even if the price shoot above $1.00 for the rest of time frame )

    The real catch of this so called SI is that they will only recognize the 'autocall' level on A PARTICULAR TRADING DAY IN EVERY CALENDER QUARTER (eg 7thJan in the 1st QTR, then it will be 7th of April in the 2nd QTR follow by 7th of July for the 3th OTR & finally 7th of October for the final QTR..!) No autocall is triggered if the price does not hit $1.00 on ONE of these 4 DAYS..!

    Of course,they will credit you ..in your case 0.667%/month as long as the price range is between $0.60 - +$0.60...

    I hope you get the gist of this SI thing...

  3. Kris // 9:41 PM  

    Thanks Maveric for your insight. With the fine points, this type of Structured Investment looks like super duper ugly to the investor, specially when the risk is so high and callable only occured on certain days. This can be easily manipulated to happen according to the issuer's advantage because the days are fixed.

    I don't see how under $0.60 you will lose your pants though. You just don't get back 100% of your investment when it matures. Correct me i am wrong. However, I do agree that if it falls to deep, even the interest that it still gives out cannot cover the losses. "If the underlying reference performs consistently below 68%4 of its initial level at each monthly observation date, annualised anticipated profit payable monthly is 5%"

    " Potentially earn 10% annualised anticipated profit payable monthly" - seems to attractive if you don't look at the fine points.

  4. maveric // 11:01 PM  

    SI type packages are offered by their 'Amanah' units & they go for 'premiere' prospects.(Look..you get a dedicated bank personnel servicing you,special reserve 'area' within the bank for you,free coffee/tea & special parking reservation too....

    However,nothing is free lah & of course,the bank is well protected (It is your $ they are 'gambling' with & it makes $ whatever the outcome is..as it may just serve as a middleman & your $ is passed to another 'investing' body elsewhere back-to-back..!)There are many 'cash rich' but ignorant people..!

    Yes..You kind of lose minimum 30% of your principle if you withdraw early...& if ever it hits rm0.60 'knock-off' level as mentioned,you don't get back 100% of your investment when it matures.

    Your last paragraph sums it all..it is the greed inherent in human beings that blind them really.

    As for me,it did hit the 'autocall' level luckily but in hindsight,it was very risky & all the anxieties were uncalled for.

  5. Kris // 2:44 PM  

    @Maveric,

    At least it turn out okey and you learn something out of it.