HSBC Launches H-Share Index Fund

by Carla Johnson, Investors Offshore.com

01 November 2006

HSBC has launched a new capital guaranteed fund which offers investors direct exposure to the Hang Seng China Enterprises Index, popularly known as the H-Share Index, and the opportunity to profit in both declining and rising market conditions.

Returns from HSBC's H-Share Index Absolute Return Capital Guaranteed Fund are based on the average of the absolute quarter-on-quarter performance of the H-Share Index. For example, if the average of the absolute quarter-on-quarter performance of the H-Share Index amounts to 24% over the life of the fund,investors will receive a 24% return at maturity, assuming a participation rate of 100%.

Participating investors will receive a 6% guaranteed cash dividend at maturity unless a 'knockout' event has occurred i.e. when the H-Share Index shows a decline of 30% or more from its initial level at the end of the first year, second year or third year. This would result in the return of 100% of funds to investors, along with a guaranteed knockout return amounting to 5% of the investor's initial investment.

The Fund also has a 100% capital guarantee, protecting investors from losing their investments in a bear market while retaining the opportunity to profit from market volatility.

"Historically, the H-Share Index has proved to be one of the most volatile indexes in Asian markets," observed Frank Turley, head of the Wealth Management Sales, Asia-Pacific for Global Markets at HSBC.

"Buying an index fund is terrific as long as the market keeps rising. But unlike with an index-tracking fund, this new Fund offers a chance to profit in a bear and a bull market," he added.

The Fund has an investment horizon of three years and a minimum investment of US$3,000. The offer price is US$10 per unit. A management fee of up to 3.45% covering the entire three years of the life of the Fund will be charged upfront.

Recommended