Important Notice of Fixed Income Product
For fixed-income products (including bonds), CPY is acting as principal.
Bonds are not equivalent to time deposits.
Bond prices and market interest rates may and will fluctuate. The price of any kind of bond may go up or down, and may even become valueless. Bond trading has its inherent risks, no profits will be guaranteed and loss may be incurred. You should consider investment decisions based on your acceptable level of risks, investment experience, investment objectives, financial resources, and other relevant circumstances. You should carefully consider whether you are suitable for any investment.
Investments with returns not denominated in the local currency are subject to currency risk. The profit or loss in investment value will be affected by fluctuations in currency rates. Investors need to pay extra attention to the currency risk that may adversely affect the value of the fund.
Bonds are not equivalent to time deposits.
Bond prices and market interest rates may and will fluctuate. The price of any kind of bond may go up or down, and may even become valueless. Bond trading has its inherent risks, no profits will be guaranteed and loss may be incurred. You should consider investment decisions based on your acceptable level of risks, investment experience, investment objectives, financial resources, and other relevant circumstances. You should carefully consider whether you are suitable for any investment.
Investments with returns not denominated in the local currency are subject to currency risk. The profit or loss in investment value will be affected by fluctuations in currency rates. Investors need to pay extra attention to the currency risk that may adversely affect the value of the fund.
Major Risk of Fixed Income Product：
Please be informed of the risks of investing in bonds. The main risks include but are not limited to as stated below：
1. Default Risk： In general, the bond is in default when the issuer fails to pay out the coupon or principal payment to bondholders. There is a risk of total loss on principal and coupon on your investment in bond. However, for some perpetual bonds and contingency convertible bonds, coupon payments may be deferred or even suspended, subject to the terms and conditions of the offering memorandum.
2. Downgrade Risk： The ratings of the bond are subject to change or downgrade by rating agencies.
3. Liquidity Risk： The liquidity of bond trading is relatively illiquid. There may not be any buyers in the secondary market at the time when you want to sell the bond, it might take a longer time, or even no market for selling.
4. Exchange Rate Risk： If the denomination is in foreign currency, there may be exchange rate risk.
5. For some bonds, especially perpetual bonds and contingency convertible bonds, may have principal write-down, loss absorption, or convertible to ordinary shares features, subject to the terms and conditions of the offering memorandum. There is a risk of loss on your investment due to the partial or full principal write-off or share conversion.
6. High-yield bonds are more sensitive to adverse changes in general economic conditions and financial conditions of the issuers. Also, high-yield bonds may be subject to higher default risk than investing in investment-grade bonds. As such, the risk of loss of principal is much higher than investing in investment-grade bonds.
7. The bond may not be listed on the Hong Kong Stock Exchange.
Different bonds may contain special features and risks that warrant special attention. These special features and risks include：
1. Risk associated with investing in high-yield bonds
(a) Vulnerability to economic cycles
Investing in high-yield bonds involves greater price volatility. These types of bonds are more sensitive to adverse changes in general economic conditions and financial conditions of the issuers. As such, the risk of loss of principal and income is much higher than investing in investment-grade bonds.
(b) Higher credit risk
Investing in high-yield bonds and/or non-investment grade bonds may be subject to a higher default risk than investing in investment grade bonds. An issuer of high-yield bond may be highly leveraged and the issuer's ability to meet its debt obligations may be adversely affected by the issuer's business and financial conditions or unavailability of additional financing.
2. Risk associated with investing in perpetual bonds/preferred securities
(a) Perpetual Bond does not have a maturity date. The coupon payment payout depends on the viability of the issuer in the very long term.
(b) The issuer has no legal obligation to redeem these instruments albeit they are callable, which means the issuer may not redeem the perpetual bonds/preferred securities on certain call dates.
(c) The issuer may have the option to defer coupons/dividends. Such missed coupons/dividends may be noncumulative, which means if the issuer misses out on coupons/dividends payment in any year, it will not be cumulated for coupons/dividends payment in future years.
(d) The issuer may have the right to convert the perpetual bonds into stocks, depending on the covenant of each perpetual Bond.
3. Risk associated with investing in bonds with contingent write down, loss absorption, and convertible to ordinary shares features. For example: contingency convertible bonds, and Basel III related capital securities.
(a) Some of the bonds, especially perpetual bonds and contingency convertible bonds may have contingent principal write-down, loss absorption, or convertible to ordinary shares features. The bonds may be written off fully or partially or converted to ordinary shares subject to the terms and conditions of the prospectus. There is a risk of loss on your investment due to the partial or full principal write-off or share conversion.
4. Risk associated with convertible bonds
For bonds that are convertible or exchangeable in nature, investors are subject to both equity and bond investment risks.
5. Risk associated with bonds that have subordinated ranking.
Holders of subordinated bonds will bear higher risks than holders of senior bonds of the issuer due to a lower priority of claim in the event of the issuer’s liquidation. Subordinated bonds are unsecured and have lesser priority than that of an additional debt claim of the senior bonds. They usually have a lower credit rating than senior bonds.
6. Risk associated with callable bonds.
If the bond is callable in which the issuer may redeem the bond before maturity, it is subject to reinvestment risk. When the interest rate goes down, the issuer may redeem the bond before maturity. If investors have to re-invest the proceeds, the yield on other bonds in the market may be less favorable.
1. Default Risk： In general, the bond is in default when the issuer fails to pay out the coupon or principal payment to bondholders. There is a risk of total loss on principal and coupon on your investment in bond. However, for some perpetual bonds and contingency convertible bonds, coupon payments may be deferred or even suspended, subject to the terms and conditions of the offering memorandum.
2. Downgrade Risk： The ratings of the bond are subject to change or downgrade by rating agencies.
3. Liquidity Risk： The liquidity of bond trading is relatively illiquid. There may not be any buyers in the secondary market at the time when you want to sell the bond, it might take a longer time, or even no market for selling.
4. Exchange Rate Risk： If the denomination is in foreign currency, there may be exchange rate risk.
5. For some bonds, especially perpetual bonds and contingency convertible bonds, may have principal write-down, loss absorption, or convertible to ordinary shares features, subject to the terms and conditions of the offering memorandum. There is a risk of loss on your investment due to the partial or full principal write-off or share conversion.
6. High-yield bonds are more sensitive to adverse changes in general economic conditions and financial conditions of the issuers. Also, high-yield bonds may be subject to higher default risk than investing in investment-grade bonds. As such, the risk of loss of principal is much higher than investing in investment-grade bonds.
7. The bond may not be listed on the Hong Kong Stock Exchange.
Different bonds may contain special features and risks that warrant special attention. These special features and risks include：
1. Risk associated with investing in high-yield bonds
(a) Vulnerability to economic cycles
Investing in high-yield bonds involves greater price volatility. These types of bonds are more sensitive to adverse changes in general economic conditions and financial conditions of the issuers. As such, the risk of loss of principal and income is much higher than investing in investment-grade bonds.
(b) Higher credit risk
Investing in high-yield bonds and/or non-investment grade bonds may be subject to a higher default risk than investing in investment grade bonds. An issuer of high-yield bond may be highly leveraged and the issuer's ability to meet its debt obligations may be adversely affected by the issuer's business and financial conditions or unavailability of additional financing.
2. Risk associated with investing in perpetual bonds/preferred securities
(a) Perpetual Bond does not have a maturity date. The coupon payment payout depends on the viability of the issuer in the very long term.
(b) The issuer has no legal obligation to redeem these instruments albeit they are callable, which means the issuer may not redeem the perpetual bonds/preferred securities on certain call dates.
(c) The issuer may have the option to defer coupons/dividends. Such missed coupons/dividends may be noncumulative, which means if the issuer misses out on coupons/dividends payment in any year, it will not be cumulated for coupons/dividends payment in future years.
(d) The issuer may have the right to convert the perpetual bonds into stocks, depending on the covenant of each perpetual Bond.
3. Risk associated with investing in bonds with contingent write down, loss absorption, and convertible to ordinary shares features. For example: contingency convertible bonds, and Basel III related capital securities.
(a) Some of the bonds, especially perpetual bonds and contingency convertible bonds may have contingent principal write-down, loss absorption, or convertible to ordinary shares features. The bonds may be written off fully or partially or converted to ordinary shares subject to the terms and conditions of the prospectus. There is a risk of loss on your investment due to the partial or full principal write-off or share conversion.
4. Risk associated with convertible bonds
For bonds that are convertible or exchangeable in nature, investors are subject to both equity and bond investment risks.
5. Risk associated with bonds that have subordinated ranking.
Holders of subordinated bonds will bear higher risks than holders of senior bonds of the issuer due to a lower priority of claim in the event of the issuer’s liquidation. Subordinated bonds are unsecured and have lesser priority than that of an additional debt claim of the senior bonds. They usually have a lower credit rating than senior bonds.
6. Risk associated with callable bonds.
If the bond is callable in which the issuer may redeem the bond before maturity, it is subject to reinvestment risk. When the interest rate goes down, the issuer may redeem the bond before maturity. If investors have to re-invest the proceeds, the yield on other bonds in the market may be less favorable.
Important Notice of Complex Bond
If the bond is a complex product, the investor should exercise caution in relation to the product.
Risk associated with investing in Complex Products.
1. Complex bonds are bonds with special features (including but not limited to, perpetual or subordinated bonds, those with variable or deferred interest payment terms, extendable maturity dates, or those which are convertible or exchangeable or have contingent write-down or loss absorption features, or those with multiple credit support providers and structures) and/or bonds comprising one or more special features.
2. The offering memorandums of the complex bond have not been reviewed by the SFC and investors are advised to exercise caution in relation to the offer.
3. Past performance of the bond is not indicative of future performance.
Risk associated with investing in Complex Products.
1. Complex bonds are bonds with special features (including but not limited to, perpetual or subordinated bonds, those with variable or deferred interest payment terms, extendable maturity dates, or those which are convertible or exchangeable or have contingent write-down or loss absorption features, or those with multiple credit support providers and structures) and/or bonds comprising one or more special features.
2. The offering memorandums of the complex bond have not been reviewed by the SFC and investors are advised to exercise caution in relation to the offer.
3. Past performance of the bond is not indicative of future performance.
Important Notice on Bond Margin Financing
The list of bonds eligible for margin financing, the relevant interest rates, and the bond financing margin ratio will change from time to time, subject to announcement by CPY.
Risk associated with bond margin financing includes but is not limited to the below:
1. Loss will be magnified if the bond price declines.
2. Investors may have to put up additional cash or bonds to meet a margin call, if any.
3. Investor may be forced to sell the bond if any margin call cannot be met.
Risk associated with bond margin financing includes but is not limited to the below:
1. Loss will be magnified if the bond price declines.
2. Investors may have to put up additional cash or bonds to meet a margin call, if any.
3. Investor may be forced to sell the bond if any margin call cannot be met.
