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Glossary
Bond
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Introduction
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Payment
Operation
Termination
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Introduction to Bonds
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Equity Linked Note
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InvestEd (SFC Investor Education Portal)
Risk Disclosure
 

Introduction of bonds

Bond is a note/ certificate issued by governmental organization, private company. Purchased a bond is similar to making an agreement to lend money to the bond issuer. Bond issuer must pay coupon interest to bondholder according to the terms and condition of this bond. Bond issuer will redeem the bond from issuer on the bond maturity date. You can hold the bonds until maturity date, or sell it prior to maturity in the secondary market.

Why invest bond

  1. Earn a return higher than traditional fixed deposit
  2. Wide range of choose depending on client's preference on risk and return.
  3. Securities products can provide client a chance of capital appreciation; While fixed income product can provide client an opportunity for stable and periodic return.

Potential Risk

  1. Price of a Debt Security

    If investors wish to buy and sell their bonds prior to maturity, they should be aware of the potential fluctuations in debt prices. Similar to other types of securities, bond prices fluctuate in response to the forces of supply and demand.

  2. Interest Rate

    The price of a fixed rate debt security usually moves in the direction opposite of market interest rates. If interest rates go up, the price of the debt security will, other factors being equal, go down, thereby increasing the current yield.

  3. Credit Rating

    Investors should note that the payment of the interest and the repayment of the principal are subject to the credit risk associated with the issuer or the guarantor.

  4. Overall Market Conditions

    As with all investments, returns on a debt security are influenced by factors such as the rate of inflation, unemployment rate, economic growth, balance of payments data, retail sales, industrial production and political changes etc.

  5. Exchange Rate Risk

    For a bond denominated in a currency other than Hong Kong dollars, Hong Kong investors may suffer losses due to changes in exchange rates.

  6. Liquidity Risk

    In Hong Kong, investors tend to buy and hold bonds until their maturity. Therefore, liquidity for many bonds in the secondary market may be low.

  7. Bond Issue Terms

    It is important that investors pay attention to the terms of the issue, e.g. a bond may be redeemed/called before maturity

Minimum investment amount

  • HKD bond - HKD 500,000 or minimum par value (whichever is higher)
  • RMB offshore bond - RMB 500,000 or minimum par value (whichever is higher)
  • USD bond - USD 100,000

For further details, please call our 24-hour InvestLine at (852) 2878-5555.