Coronavirus: Rich Asians face billions in losses on structured notes

HONG KONG - A popular investment among Asia's wealthy in the years of rock-bottom interest rates has been upended in the recent market rout, leaving investors facing losses estimated to be in the billions of dollars.

The products work well in a rising market or one moving sideways, where investors recover the initial investment and the coupon owed, which could be as high as 12 per cent per annum. But the interest-bearing notes, linked to the performance of underlying assets, open holders to the risk of steep losses if those assets fall below a preset level.

One Singapore-based financial services professional, who asked to remain anonymous, lost between 30 per cent and 40 per cent of the US$400,000 he invested in fixed-coupon notes tied to shares including Microsoft Corp, Broadcom Inc and India's ICICI Bank Ltd. The notes offered a coupon of about 10 per cent, paid quarterly with a one-year maturity.

New rules following the collapse of Lehman Brothers Holdings included narrowing the scope of qualified investors - who must have about US$1 million to invest in Hong Kong and US$1.4 million in Singapore - and categorising clients into different risk tolerance buckets. "We are seeing a mix of fear of missing out and fear itself - the allure of an annualised yield of 8 per cent to 10 per cent versus increasing risk aversion," said CFA Institute's Leung.

one losses is another s gains. there are winners and losers in a business cycle.

Don’t care

Who gives a fuck? What about the guys with no money!?

The big difference versus holding long ETFs versus these StructuredNotes is that the Structures are time bound and will shut down with the losses at a specified point, the ETFs & Stocks can come up back any time

They’re rich, it doesn’t matter

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