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Equity Linked Investments (ELI)


Buying an ELI

An ELI is an equity structured investment product that aims to offer a potentially higher return compared to traditional time deposits while the risk involved in ELI is similar to the underlying stock. Under volatile market conditions, the volatility of ELIs will be lower than the underlying stock. In a static market, ELIs may provide better yields than those achieved through cash deposits or direct investment in shares.

With an investment amount as low as HKD100,000, customers can subscribe non-listed Equity Linked Investments ( ELIs ) issued by Macquarie Bank Limited. ELIs are available over an extensive range of Hong Kong Listed shares including blue chips, red chips, etc. A summary table is shown as follows:
Subscription Channels Contact your Account Executive or our Customer Services Hotlines +852 3550 6988 (Hong Kong, China) / +86 400 120 3830 (Mainland China)
Subscription Amount HKD100,000 (HKD10,000 thereafter)
We offer tailored made ELI for investment more than $500,000
Subscription Charge No commission, Stamp Duty, Levy nor other charges
Underlying Stocks
Over 20 listed stocks in Hong Kong including blue chips and red chips such as HSBC, Hang Seng Bank, Cheung Kong Holdings and China Mobile (Please refer to the daily term sheets for details)
Subscription Period
Every trading day, 10:00 am - 3:15 pm (Evergrande Securities reserves the right to change the subscription period without prior notice.)
Issue Date (T) Execution at 4:00 pm on Issue Date (Reference Price = Reference Price Percentage x Closing Price of Underlying Stocks)
Payment Date T (Issue Date) 
For ELI subscriptions
If Closing Price (Reference Price): The ELI will be redeemed at par (Nominal Value) on Maturity Date 

If Closing Price (Reference Price): The investor will receive a pre-determined number of shares at the Reference Price. The odd lots will be converted into cash using the Closing Price on Fixing Date and refunded to the investor

Maturity Date Fixing Date + 2(Investors will receive the Nominal Value of ELI or the underlying stocks as agreed under terms of each ELI on Maturity Date)

 Equity Linked Investments Overview

When you purchase an ELI, investors have agreed either to receive interest or to purchase a listed stock from the issuer at an agreed price on a specific date. The purchase price of the ELI is set at a discount to the Nominal Value of the ELI. The number of shares or cash received on maturity date depends on the price performance of the shares.

At the maturity of the ELI there are two possibilities:
1.If the share price is at or above the Reference Price*, you may:

  • receive Cash (Issuer may deliver shares having a value equal to the Nominal Value);
  • realise the maximum return on your ELI. 

 2. If the closing price of the Shares is below the Reference Price, you may:

  • receive a fixed number of shares that was set at the time of making your investment. The fixed number of shares, referred to as the Maximum Number of Shares, will have a value less than the Nominal Value; 
  • realize a loss on the amount you invested. 

*The Reference Price is specified at the time of investment and will be a percentage of the share price at that time. Work out the share price where you will break even on your investment.

Maximum Number of Shares = Nominal Value / Reference Price 
Breakeven share price at maturity =(Reference Price - [ (Nominal Value - Purchase Price) / maximum number of shares] ) 

 
Example 

Assume an investor, based on professional advice, likes the stock Sun Hung Kai Properties and would be happy to purchase that stock at $56.963, a 7% discount to the current market price of $61.25. However the investor believes the stock is relatively fully priced and unlikely in the short term to increase dramatically in value. The investor therefore chooses a$100,000 Macquarie ELI over Sun Hung Kai Propertie shares with a reference price of $56.963

Underlying Share Sun Hung Kai Properties 
Issue Date 21 June 2004
Settlement Date 4 August 2004 (investment period: 44 days)
Fixing Date 2 August 2004
Nominal Value $100,000
Purchase Price $98,570
Share Price on Issue Date $61.25
Reference Price $56.963
Maximum Number of Shares 1,755.53 (Nominal Value / Reference Price)
Potential Return 12.03% pa

 


Maturity

  • At the Fixing Date in approximately 1.5 months
If the market price of Sun Hung Kai shares is at or above $56.963
  • the investor receives cash $100 000 (Issuer may deliver shares having a value equal to the Nominal Value); 

Alternatively if the market price of Sun Hung Kai shares at the Fixing Date is below $56.963

  • the investor receives 1,755.53 shares (odd lots may be cash settled). Since the investor has outlaid $98,570 for the ELI, this represents an entry price of $56.15 per share, and is the investor's break-even price. Therefore, a share price below $56.15 will represent a loss on the initial investment.
The lower the share price, the greater the loss on the Investor's investment (eg. if the share price went down to $1.00 the investor would receive 1,755.53 shares worth a total of $1,755.53 representing a loss of approximately 98.22%).
 

Risks

By investing in an ELI, you are agreeing to purchase shares and may be financially exposed to declines in the price of the chosen shares. A fall in the price of the shares below the Reference Price as at the Fixing Date will negatively impact the return on the ELI. You should only invest in ELIs over shares which you would accept to own at the Nominated Reference Price. 

Investment in Equity Linked Investments involves substantial risks including market risk, liquidity risk and the risk that issuer will be unable to satisfy its obligations under the Equity Linked Investments. Investors should ensure that they understand the nature of all of these risks before making a decision to invest in Equity Linked Investments. 

Investors should understand that ELI may have no value at the maturity date.

Disclaimer: Information contained in this message is not intended to provide professional advice or any of it constitutes a solicitation or an offer to buy or sell investment products. Evergrande Securities and Evergrande Futures will not represent or warrant such information is accurate, complete and up-to-date. Evergrande Securities and Evergrande Futures will not accept any liability in relation to the content of this message.

There will be risk in investment. Before investment, you must carefully consider if the investment products or services are suitable for you, in light of your investment objectives, experience and financial position. Price of investment products may move up or down and may become valueless. Losses would be incurred as a result of buying and selling investment products and you should accordingly be aware of all risks pertaining to investment. As such, you are strongly advised to seek independent professional advice whenever appropriate.

Contact Us

Customer Service Hotline:
Tel: +852 3550 6888 (Hong Kong, China)
Tel: +86 400 120 3830 (Mainland, China)

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Tel: +852 3550 6901

Technical Support:
Tel: +852 3550 6921

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