Inbound certificates are structured products that enable investors to obtain predetermined fixed income when they expire. If the price of the underlying asset is within the ceiling price and the floor price(within the boundary) on the expiry date, the investor will receive a fixed income of HK$1 (calculated per inbound securities unit); if the price of the relevant asset is within the ceiling price and the floor price. Outside the price (out-of-bounds), investors can get a fixed income of HK$0.25 (calculated per in-boundary security unit).
In-bounds: If the price on the expiry date is within the ceiling price and the floor price, the cash settlement amount: HK$1
Out-of-bounds: If the expiry date is priced outside the ceiling price and the floor price, the cash settlement amount: HK$0.25
The validity period of the inbound card at the time of issuance ranges from 6 months to 5 years. Before the expiry date, investors can buy and sell inbound securities on the spot market under the Hong Kong Stock Exchange. On the expiry date, inbound certificates will only be settled in cash.
Inbound certificates are issued by a third party. The issuer is usually an investment bank and has no connection with the Hong Kong Stock Exchange or related assets.
2.1 There is a ceiling price and a floor price, and there is no mandatory withdrawal.
Investors have foreseen the maximum gains and losses when buying inbound securities.
Investor's highest profit = HK$1-investment amount
Investor's maximum loss = investment amount-HK$0.25
2.2 Investors can trade or hold inbound certificates on the spot market under the Hong Kong Stock Exchange until the expiry date.
2.3 All inbound securities transactions above HK$1 will not be recognized and will be cancelled.
2.4 Since the minimum fixed income is HK$0.25, the price of the inbound securities is expected to be HK$0.25 or above.
The naming rule for the stock abbreviation of the in-boundary securities: QQZZ year, month and boundary A, the code range of the in-boundary securities is 47000-48999.
QQ = related assets
ZZ = publisher
Year =expiration year
Month = expiration month. January to October will be represented by Chinese numbers (one, two...ten); November and December will be represented by "A" and "B" respectively
Boundary = boundary certificate
A = The same issuer reissues inbound certificates with the same expiry date and month for the same related asset to show the serial number (A, B, C...)
Index-related assets: the final settlement price of index futures contracts in the same expiration month
Related assets of a single class of shares: the average closing price of the five trading days before the expiry date
As a structured product, there are some risks in the industry certificate, and there are some additional risks.
The pricing structure of inbound warrants requires investors to accurately assess the value of inbound warrants based on the expected probability that the valuation of the underlying asset is within the price range between the ceiling price and the floor price (both included). It may be difficult for investors to properly assess its value and/or use it as a hedging tool.
If the valuation of the underlying asset is within the price range between the floor price and the ceiling price (both included), the investor will only receive the highest return of HK$1 per inbound certificate at maturity. Therefore, there is a ceiling on the potential return of the inbound certificate.
Since the return limit of the inbound securities is a fixed amount (HK$1 per certificate), the transaction price of the inbound securities should not be higher than the return limit of HK$1. Therefore, any inbound securities transactions higher than HK$1 will be cancelled and will not be recognized by the Stock Exchange.