To Avoid Any Principal Loss in ELS... Hong Kong H-Index Must Rise Above 8000

Hong Kong H Index in the 5000s, No One Loses Even if It Rises to 8400s
Loss Investors Begin to Decrease Once It Recovers to the 7000s

On the 30th of last month, the Hong Kong H Index closed at 5857.54. Although the H Index has risen compared to its all-time low on October 28th last year (5028.98), it is still less than half of what it was three years ago. From January to June 2021, the H Index consistently stayed above 10,000. On February 19th of that year, it even reached 12,106.77.

One of the investors who put 50 million KRW into equity-linked securities (ELS) products linked to the H Index at a commercial bank at that time, Mr. Jung Ji-won (47), said, "For nearly three years now, I have been constantly worried, unable to sleep, and watching the Hong Kong H Index all day long." He added, "When I entered in May of that year, the index was at 10,699.00, so it needs to rise to about 7,000, which is 65% of that level, to avoid losses by maturity. I am just hoping for any positive news until then."

How much does it need to rise to avoid principal loss?

According to the financial sector on the 1st, investors in Hong Kong H Index ELS products maturing in the first half of next year need the H Index, currently in the 5,000 range, to rise to at least the 7,000 range to avoid principal losses. Reaching the 7,000 range means the number of investors experiencing losses will start to decrease, but it does not mean all investors can avoid losses.

Depending on the products sold by each bank, the H Index must be at least 65-70% of the level at the time of investment for investors to receive a profitable repayment at maturity. If it does not reach this level, investors will lose principal proportional to the decline in the stock price. A commercial bank official explained, "The index needs to rise to at least the 7,000 range to start reducing the number of loss-making investors, and it must reach the 8,400 range to ensure that no investors suffer losses at all."

Is a miracle like six years ago unlikely?

Investors are hoping for a miracle like six years ago. In 2015, Hong Kong H Index ELS products also faced widespread principal losses. The H Index, which was above 14,000 on April 1, 2015, plummeted to around 7,500 in just nine months by February 2016. At that time, out of a total 37 trillion KRW worth of ELS, 4 trillion KRW were at risk of loss. However, just before maturity, the H Index rebounded. It recovered to the 11,000 range in September 2017 and surged to the 13,000 range by February 2018, relieving both sellers and investors. Ultimately, most ELS investors were able to receive their principal plus interest at maturity.

But this time, the atmosphere is different. Unlike in the past, there is little chance that the index will surge by thousands of points now. A financial regulator said, "The meeting between President Biden and President Xi Jinping in mid-November was the last hope for a driving force behind the H Index's rise, but it ended anticlimactically." He added, "Considering the global economic situation, it does not seem easy for the H Index to rise to the 7,000-8,000 range."

This content was produced with the assistance of AI translation services.