HSBC first on the scene with QDII products in China

HSBC has become the first foreign bank to provide Qualified Domestic Institutional Investor (QDII) products in mainland China. The bank received approval from China’s State Administration of Foreign Exchange (SAFE) for a quota of US$500 million for its QDII services in August.

HSBC’s QDII offerings, under the Chinese name of Hui Ju Tong, comprise two capital protected investment products. One is linked to a basket of currencies and the other is linked to Hong Kong stock index, the Hang Seng Index. HSBC has jointly developed the products with Bank of Communications.

The QDII products are available at HSBC’s outlets in nine cities including Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Qingdao, Dalian, Xiamen and Suzhou. The products are offered in US dollars as foreign banks are not currently permitted to provide renminbi (RMB) banking to mainland Chinese citizens.

The funds raised from selling the products will be invested overseas in two structured notes issued by HSBC.

The currency basket linked structured note requires a minimum investment of US$10,000 and has an investment tenure of 18 months. It has a variable return linked to the appreciation of a basket of currencies comprising the euro, Korean won and Indian rupee, against the US dollar. Investors will receive 100% of their principal plus a potential variable return of up to 18% upon maturity.

The equity index linked structured note pays a return linked to the positive performance of the Hang Seng Index and has an investment tenure of two years. The product is designed with an auto-call feature, which is initiated when the underlying index level is equal to or greater than the trigger level on any of the valuation dates.

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