Bonus enhanced note on Tencent & Ping An Insurance
We view the current sell off an opportunity to invest as the concerns on Tencent are overdone, as it aims to invest in new areas to sustain its high growth rate of the past years.
Both Tencent and Ping An Insurance are domestic focused and have little or no exposure to US, hence would be less likely to be affected by any subsequent escalations in trade issues between China and US.
We propose a bonus enhanced note with a knock in feature to enable conditional protection of the note investment.
Bonus enhanced note details:
Underlying: Tencent, Ping An Insurance
Tenor: 5 months
Strike: 100%
American knock in: 80%
Digital strike: 100%
Flat coupon: 7.97%
Notional: HKD
Enter at market closed.
Payoff at maturity:
1. If final price is equal or greater than digital strike: 100% + max of coupon or final level / digital strike - 1.
2. If final price is less than initial price but greater than put strike: 100%.
3. Otherwise, receive shares of the underlying stock at the put strike price in lieu of investment principal.
Few possible scenarios:
Scenario 1.
At the end of 5 months, both Tencent and Ping An are above entry price (digital strike) but below 7.97%. Client will earn absolute return of 7.97%.
Scenario 2.
At the end of 5 months, both stocks are above 7.97%. Client will earn performance of worst performing stocks.
At maturity, Tencent is up 15% and Ping An is up 12%. Client will earn 12%.
Scenario 3:
At the end of 5 months, worst performing stock is below entry price but above 80% (knock in level) through out, client will only get back principal.
Scenario 4:
At the end of 5 months, worst performing stock is below 80%, client will converted to the share at 100% (entry price).
This structured note is suitable for investors who has a bullish view on Tencent and Ping An. But they want a 20% protection on the downside. And they want to benefit if both stocks' share price go up.
Details on underlying stocks:
• Tencent Holdings sees itself as the connector in the society. Through its platforms, it connects users with other users, users with merchants and vice versa.
• Users get to stay connected and access to content, services and transactions from its platforms. Merchants also benefited by gaining access to a larger user base.
• Tencent also allows merchants to have a place to facilitates online payment transactions and improved on their customer relationship management (CRM) and targeted advertising from the database of Tencent.
• Ping An has identified five key technologies—biometrics, big data, artificial intelligence, blockchain, and the cloud—to ease the growth of its four ecosystems: financial services, health care, auto services, and real estate finance.
• It sees itself not only as an insurer, but as a tech company that is also into insurance.
• The jewel in Ping An’s crown is Lufax, China’s second-largest fintech behind Ant Financial, which is backed by Alibaba Group Holding. Lufax is a peer-to-peer lender that matches borrowers with investors, collecting a 4% fee on each loan.
• Another unicorn in Ping An’s fold is its Good Doctor app, which has a user base of 180 million and has been aggressively deploying AI. Good Doctor has a team of more than 1,000 doctors providing online consultations, and is set to raise over $1 billion in an IPO.
Both Tencent and Ping An Insurance are domestic focused and have little or no exposure to US, hence would be less likely to be affected by any subsequent escalations in trade issues between China and US.
We propose a bonus enhanced note with a knock in feature to enable conditional protection of the note investment.
Bonus enhanced note details:
Underlying: Tencent, Ping An Insurance
Tenor: 5 months
Strike: 100%
American knock in: 80%
Digital strike: 100%
Flat coupon: 7.97%
Notional: HKD
Enter at market closed.
Payoff at maturity:
1. If final price is equal or greater than digital strike: 100% + max of coupon or final level / digital strike - 1.
2. If final price is less than initial price but greater than put strike: 100%.
3. Otherwise, receive shares of the underlying stock at the put strike price in lieu of investment principal.
Few possible scenarios:
Scenario 1.
At the end of 5 months, both Tencent and Ping An are above entry price (digital strike) but below 7.97%. Client will earn absolute return of 7.97%.
Scenario 2.
At the end of 5 months, both stocks are above 7.97%. Client will earn performance of worst performing stocks.
At maturity, Tencent is up 15% and Ping An is up 12%. Client will earn 12%.
Scenario 3:
At the end of 5 months, worst performing stock is below entry price but above 80% (knock in level) through out, client will only get back principal.
Scenario 4:
At the end of 5 months, worst performing stock is below 80%, client will converted to the share at 100% (entry price).
This structured note is suitable for investors who has a bullish view on Tencent and Ping An. But they want a 20% protection on the downside. And they want to benefit if both stocks' share price go up.
Details on underlying stocks:
• Tencent Holdings sees itself as the connector in the society. Through its platforms, it connects users with other users, users with merchants and vice versa.
• Users get to stay connected and access to content, services and transactions from its platforms. Merchants also benefited by gaining access to a larger user base.
• Tencent also allows merchants to have a place to facilitates online payment transactions and improved on their customer relationship management (CRM) and targeted advertising from the database of Tencent.
• Ping An has identified five key technologies—biometrics, big data, artificial intelligence, blockchain, and the cloud—to ease the growth of its four ecosystems: financial services, health care, auto services, and real estate finance.
• It sees itself not only as an insurer, but as a tech company that is also into insurance.
• The jewel in Ping An’s crown is Lufax, China’s second-largest fintech behind Ant Financial, which is backed by Alibaba Group Holding. Lufax is a peer-to-peer lender that matches borrowers with investors, collecting a 4% fee on each loan.
• Another unicorn in Ping An’s fold is its Good Doctor app, which has a user base of 180 million and has been aggressively deploying AI. Good Doctor has a team of more than 1,000 doctors providing online consultations, and is set to raise over $1 billion in an IPO.
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