Bank of China (Hong Kong) Limited - Mainland Business > Investment Services

Premium Product

Premium Product is a flexible investment product that combines the features of both fixed deposit and currency option. With a wide range of currencies and contract periods to choose from, Premium Product enables you to capture the investment opportunity.

The actual return on this transaction will depend on market conditions and the level at expiry time on the Maturity Date of the exchange rate of the currency to which this transaction is linked, it will be paid in the Investment Currency or the Linked Currency, whichever has depreciated against the other, the amount of the Linked Currency paid to you may on conversion be less than the amount of your investment.

Enjoy fixed deposit interest and option premium simultaneously
Real time pricing
Flexible choices of currencies and contract periods
Simple account-opening procedure

Enjoy fixed deposit interest and option premium simultaneously

Premium Product offers you higher interest than that of general fixed deposits. When you place your Premium Product, simply select an investment currency and a linked currency, the exchange rate of which you expect to remain fairly stable. Either the investment currency or the linked currency must be denominated in HKD or USD. We will instantly fix a strike price according to the linked currency you have chosen. At maturity, if the spot exchange rate of the linked currency is equal to or higher than the strike price¹, we will pay you the principal amount and agreed interest in the investment currency. Otherwise, we will convert the principal amount and agreed interest payable into the linked currency for you.

Premium Product may offer a higher return in a stagnant market. Even if the linked currency does not move as you anticipate, the higher-than-average interest rate may enable you to minimize loss.

Real time pricing

The strike price and the premium interest rate of the Premium Product will be fixed at the time when you enter into an agreement on Premium Product transaction. This allows you to make a fair investment decision.

Flexible choices of currencies and contract periods

Investment currencies and linked currencies can be denominated in HKD, USD, AUD, NZD, GBP, CAD, EUR and JPY. Contract periods range from 1 week, 2 weeks, 1 month, 3 months to 6 months². By using these terms in various combinations, you can better meet your diverse investment needs.

Simple account-opening procedure

The minimum transaction amount of investment currencies of Premium Product is equivalent for RMB50,000. For account opening, please visit any of our branches or sub-branches in the Mainland of China, where you can conduct transactions between 9:00 a.m. and 5:00 p.m. from Monday to Friday.

Example
GBP/HKD exchange rate is expected to remain stabilized.

Investment Currency: HKD Premium Interest Rate:10.5921% p.a.,
including the fixed deposit interest rate of 1.04% p.a.
(Withholding tax is deducted from the fixed deposit interest)

Linked Currency: GBP

Principal Amount: HKD200,000

Contract Period: 1 week (7 days) HKD Fixed Deposit Interest Rate:1.04% p.a.
(Withholding tax is deducted)
GBP Fixed Deposit Interest Rate:1.60% p.a.
(Withholding tax is deducted)

Strike Price: 13.79(GBP/HKD)

Exchange rate on the Value Date 13.79(GBP/HKD)

Analysis of Potential Return - Return comparison of three types of deposit

Item Investment Period 1 Week
GBP/HKD exchange
rate at maturity 13.74 13.79 13.84
Premium
Product Exercise decision Bank exercises the option and converts principal & interest into GBP Bank does not exercise the option and principal & interest are paid in HKD.
Principal & interest at maturity GBP14,532.72 HKD200,406.27
(In HKD) HKD199,679.57 HKD200,406.27
Return / loss -HKD320.43 HKD406.27
Annual rate of return -8.35% 10.5921%
GBP
Time Deposit Principal & interest at maturity GBP14,507.71
(In HKD) HKD199,335.94 HKD200,061.32 HKD200,786.71
Return / loss -HKD664.06 HKD61.32 HKD786.71
Annual rate of return -17.31% 1.6% 20.51%
HKD
Time Deposit Principal & interest at maturity HKD200,039.89
Return HKD39.89
Annual rate of return 1.04%

The table above is for reference only. It does not constitute the indication of future return. The strike price, premium interest rate and fixed deposit rate is offered by Bank of China (Hong Kong) on 8th August 2005.

Given the GBP/HKD exchange rate is within the range between 13.7648 and 13.8138, the return of Premium Product will be higher than that of HKD fixed deposit and GBP fixed deposit in an equivalent amount of principal at the same maturity. (The chart only shows the spot forex rate at maturity for a particular range.)

Remarks:

If the Strike Price and Spot Exchange Rate stated are not expressed in terms of the amount of the investment currency required to purchase one unit of the linked currency, the strike price or spot exchange rate shall be equal to one divided by the Strike Price or spot exchange rate stated rounded up to or down to such decimal place as the bank may determine.
The currency and contract period vary with reference to market conditions. Please contact our staff for details.

Risk Disclosure Statements

The return which may become payable on this transaction may be higher than the interest on an ordinary time deposit. However, this carries with it higher risks. The actual return on this transaction will depend on market conditions and the level at expiry time on the Maturity Date of the exchange rate of the currency to which this transaction is linked. It will be paid in the Investment Currency or the Linked Currency, whichever has depreciated against the other. The risks which you will assume depend on the structure and terms of this transaction. In the event that the Linked Currency depreciates at maturity, the amount of the Linked Currency paid to you may on conversion be less than the amount of your investment.
You may not terminate this transaction without our prior written consent, and could incur significant losses in closing this transaction, before maturity.
This transaction is "non transferable" and it may be impossible for you to close out or liquidate it.
Any recommendation, suggestion or information given by us to you are for your reference only. Reliance on such recommendation, suggestion or information is at your own risk. We make no representations or assurance regarding the performance of your investment.
You confirm to us that you have sufficient knowledge and experience to be able to evaluate the merits and risks of entering into this transaction, are acting in reliance solely upon your own judgment or upon professional advice obtained independently of us as to those merits and risks (including, where relevant, the tax and accounting treatment of this transaction) and are not relying upon our views or advice.
These statements do not purport to disclose all the risks and other significant aspects of this transaction. The intention is to inform you that the risk of loss may be substantial in certain circumstances.
This product is with high investment risk. Your principal may suffer substantial loss due to the market fluctuations. You shall carefully consider the risk involved before making the investment. You should not deal in this transaction unless you understand the nature of the transaction you are entering into and the extent of your exposure to risks. You should carefully consider whether this transaction is suitable for you in the light of your experience, financial position and other circumstances. If you have any concerns about this transaction you should consult independent professional advisers.