BOCI launches CLNs for retail investors in Hong Kong

Bank of China International (BOCI) has launched its first credit-linked investment product for Hong Kong’s retail investors.

Called Flexibond, the five-year credit-linked notes are referenced to PCCW-HKT (HKT), a subsidiary of Hong Kong-based integrated communications company PCCW. Rated BBB by Standard and Poor’s (S&P) and Baa2 by Moody’s Investor Services, the notes offer investors the option of either redeeming the investments at 109% on maturity, or to exchange the investment for HSBC shares based on a conversion price on or before maturity – set at 120% of HSBC’s average closing price for the first three trading days after the issue. In the case of a credit default, the bonds will be redeemed and investors will be repaid with the July 2013 PCCW HKTC Capital bond.

“Flexibond is the first investment product BOCI has launched in the Hong Kong retail market,” said Polly Wong, vice-president of equity derivatives at the bank in Hong Kong. “In the future BOCI will develop more structured investment products to facilitate the market development and satisfy the needs of investors.” These could include more credit-linked products and equity-linked products - in the form of bonds or principal-protected structures - and possibly listed warrants.

“In view of the current ever-changing market environment, the design of this new product is to offer investors another choice of quality investment with lower risk exposure,” added Wong. “Not only does Flexibond help satisfy investor need for safer investments and higher returns, but it also brings in additional opportunities for capital enhancement. When the equity market performs well, investors who choose to switch to HSBC shares may enjoy an investment return of more than 9%.”

The notes are being issued by the bank’s structured investment product platform, boci.