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Risk of investing in Renminbi-Denominated Products1 |
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Investment / market risk: Like any investments, renminbi products are subject to investment risk and may not be principal protected i.e. the assets that the products invest in or referenced to may fall as well as rise, resulting in gains or losses to the product. This means that the Client may suffer a loss even if renminbi appreciates. |
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Liquidity risk: Renminbi products are also subject to liquidity risk as renminbi products are a new type of product and there may not be regular trading or an active secondary market. Therefore the Client may not be able to sell his investment in the product on a timely basis, or the Client may have to sell the product at a deep discount to its value. |
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Issuer / counterparty risk: Renminbi products are subject to the credit and insolvency risks of their issuers. The Client should consider carefully the creditworthiness of the issuers before investing. Furthermore, as a renminbi product may invest in derivative instruments, counterparty risk may also arise as the default by the derivative issuers may adversely affect the performance of the renminbi products and result in substantial losses. |
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Currency risk: In general, a non-Mainland (including Hong Kong) investor who holds a local currency other than renminbi will be exposed to currency risk if he invests in a renminbi product. This is because renminbi is a restricted currency and subject to exchange controls, the Client may have to convert the local currency into renminbi when the Client invests in a renminbi product. When the Client redeems / sells his investment, the Client may also need to convert the renminbi received upon redemption / sale of his investment product into the local currency (even if redemptions / sale proceeds are paid in renminbi). During these processes, the Client will incur currency conversion costs and the Client will also be exposed to currency risk. In other words, even if the price of the renminbi product remains the same when the Client purchases it and when the Clients redeems / sells it, the Client will still incur a loss when the Client converts the redemption / sale proceeds into local currency if renminbi has depreciated. Like any currency, the exchange rate of renminbi may rise or fall. Further, renminbi is subject to conversion restrictions and foreign exchange control mechanism. |
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Depending on the nature of the renminbi product and its investment objective, there may be other risk factors specific to the product which the Client should consider. Before making an investment decision, always read the risk factors as set out in the offering documents and seek professional advice where necessary. |
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| 1For the avoidance of doubt, “Renminbi-denominated products” shall include “listed Renminbi-denominated securities”. |
