eRepo Important Notice
Before choosing eRepo Product, please consider the below important notice and main risk (Including but not limited to the below).
eRepo is a product offering to clients of Core Pacific-Yamaichi International (H.K.) Limited (“CPY”) only and not a product offering or recommending to general public.
CPY eREPO is not time deposit nor any other similar deposit products.
eREPO and bonds available for investment are not newly-issued securities products. Its rate of return may be changed with the market. The rate of return depends to your agreement on the trading date. The terms will not be changed during the contract period (the volatility of bond price would not affect the rate of return of you settled),but the rate of return for renewal the eREPO might change according to market condition.
eRepo is a product offering to clients of Core Pacific-Yamaichi International (H.K.) Limited (“CPY”) only and not a product offering or recommending to general public.
CPY eREPO is not time deposit nor any other similar deposit products.
eREPO and bonds available for investment are not newly-issued securities products. Its rate of return may be changed with the market. The rate of return depends to your agreement on the trading date. The terms will not be changed during the contract period (the volatility of bond price would not affect the rate of return of you settled),but the rate of return for renewal the eREPO might change according to market condition.
Major Risk of eRepo
The risk of eRepo including but not limited to the below:
Counterparty risk: If counterparty collapses during the eRepo contract period, counterparty may not honor the buyback contract on the agreed contract day. Client may experience additional difficulties in selling the bond with a nominal value below the minimum denomination. Under the market and credit risks, client may not be able to recover the investment amount in liquidating the bond.
Counterparty risk: If counterparty collapses during the eRepo contract period, counterparty may not honor the buyback contract on the agreed contract day. Client may experience additional difficulties in selling the bond with a nominal value below the minimum denomination. Under the market and credit risks, client may not be able to recover the investment amount in liquidating the bond.
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 bonds 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 bonds 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. Main risks include but not limited to as stated below.
1. Default Risk: In general, the bond is in default when the issuer fails to pay out coupon or principal payment to bond holder. 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 prospectus.
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 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, they may have principal write down, loss absorption or convertible to ordinary shares features, 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.
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 in 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 bond involve 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-grading 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 dates. The coupon payment pay-out 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/dividend. Such missed coupons/dividend may be noncumulative, which means if the issuer has missed out on coupons/dividend payment in any year, it will not be cumulated for coupons/dividend 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, 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 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 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 coupon or principal payment to bond holder. 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 prospectus.
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 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, they may have principal write down, loss absorption or convertible to ordinary shares features, 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.
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 in 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 bond involve 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-grading 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 dates. The coupon payment pay-out 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/dividend. Such missed coupons/dividend may be noncumulative, which means if the issuer has missed out on coupons/dividend payment in any year, it will not be cumulated for coupons/dividend 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, 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 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 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 about 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 Core Pacific-Yamaichi.
Risks Relating to Bond Margin Financing:
1. Loss will be magnified if bond price declines.
2. Investor may have to put up additional cash or bond to meet margin call, if any.
3. Investor may be forced to sell the bond if any margin call cannot be met.
Risks Relating to Bond Margin Financing:
1. Loss will be magnified if bond price declines.
2. Investor may have to put up additional cash or bond to meet margin call, if any.
3. Investor may be forced to sell the bond if any margin call cannot be met.
