Personal Banking

What is PI?

PI is a structured investment product that combines foreign currency term deposits with foreign exchange futures, but does not guarantee the principle. In this investment, the customer will sell the futures to the Bank at a pre-agreed exchange rate in order to achieve higher returns than most general foreign currency term deposits generate. PI customers will gain enhanced yields on top of the general foreign currency term deposit interest rate due to the fixed price at selling the futures. However, this means that the customer necessarily has to undertake higher risks on the foreign exchange rate.

How does PI work?

The customer should first determine the principal amount in the base currency (the currency which the customer owns) and choose another currency as the alternate currency in which the foreign exchange option is sold. After the Bank and the customer have agreed on the base currency, the alternate currency, the investment tenor, the interest rate, and the enhanced yield, the Bank will determine the interest amount and the enhanced amount (both calculated in the base currency) based on the agreement and in accordance with the PI documents.

What is the investment income?

The Bank shall have the right to determine whether to pay the redemption amount in the base currency or in the alternate currency (converted using the Pre-Agreed Exchange Rate) at maturity depending on the movements of the foreign exchange rate. The redemption amount represents the principal amount invested by the customer in the PI, plus the interest amount and the enhanced amount.

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Benefits of PI

• Tailored to suit your currency needs, an investment based on your choice of currency pairs and a tenor that matches your investment requirements;
• Higher returns and enhanced yields are earned based on your view of exchange rate movements and the risks undertaken
• Returns are generally higher than those of general foreign currency fixed term deposits
• Short Investment tenors from one week to three months
• A wide range of currencies to choose from including USD, AUD, EUR ,JPY, HKD, GBP, NZD, SGD CHF

How It Works

Assumptions

Assuming the spot AUD/USD rate is 0.9750 and you owns USD 100,000, and you hold the view that the spot AUD/USD rate will not touch or go lower than 0.9250 within the one month tenor (i.e., you are willing to purchase AUD at the rate of 0.9250).

Case Analysis

On fixing date (the second business day prior to the maturity date), the Bank will compare the prevailing spot AUD/USD rate against the Pre-Agreed Exchange Rate to determine the currency (the base currency or the alternate currency) in which the redemption amount will be paid. If the Bank determines to pay the redemption amount in the alternate currency, the redemption amount will be converted into the alternate currency at the Pre-Agreed Exchange Rate. In the event that the spot rate reflects a weakening of the base currency against the alternate currency relative to the Pre-Agreed Exchange Rate, the Bank will pay you the redemption amount in the base currency. If the spot rate reflects a strengthening of the base currency against the alternate currency relative to the Pre-Agreed Exchange Rate, the Bank will pay you the redemption amount in the alternate currency. The interest amount and enhanced amount will be calculated on the basis of a 365 day year for the currencies of GBP, HKD and SGD, while on the basis of a 360 day year for other currencies.

1. All returns calculated in the cases below are pre-tax returns. All data and foreign exchange rates are intended for reference purposes only, and shall not be deemed as indicative of actual or future performance of PI and foreign exchange rate
2. Risk Disclosure Statement and Important Reminder