Equity-linked Instruments are Not Low Risk Products

Investors are reminded that most equity-linked instruments (ELIs) are not capital protected and are only suitable for those who are able to understand their complicated structures.

The SFC today publishes an updated leaflet on ELIs as part of its investor education leaflet series (Note 1).

The leaflet discusses the major features and risks of unlisted ELIs. Numerical examples are included to illustrate a bull ELI linked to a single stock, a bull ELI linked to a basket of stocks and a bull ELI with a special feature known as an “airbag”.

Investors should note that, like other structured products, the investment return on an ELI depends on the future price movement of the underlying asset. Investors may suffer a capital loss if the underlying asset price goes against their view.

As ELIs have complex features, it is very important for investors to find out the specific terms and risks of an ELI from its offer document and consider whether it is suitable for them in light of their investment objectives, risk tolerance and financial position.

The English and Chinese versions of the leaflet are now available at the SFC offices, and can be viewed in the “Publications” section of the SFC-operated investor portal, the InvestEd website at www.InvestEd.hk. To complement the leaflet, a “Structured Products” article series is posted under the “Features & Dr Wise” section of the InvestEd website to further explain the mechanism of ELIs.

Intermediaries are invited to display and distribute the leaflet to their clients.

Ends

Notes:

1. Other investor education publications are How to Make a Complaint, Know Your Broker, IPO Investing, Fund Investing, Hedge Funds and Index Tracking Exchange Traded Funds.