Previously, I wrote about the Merrill Lynch China Participation Certificates. Actually, Merrill Lynch were not the first bank to launch such a product on SGX. An earlier issuer was ABN Amro with their series of Zero Certificates.
The ABN Amro Zero Certificates are non-leveraged warrants that give investors the ability to invest in focused themes and foreign markets that are not so easily accessible. Of course, you could always invest in some of these markets via unit trusts. However, if you want a low cost option, zero certificates are another alternative.
Here’s the list of certificates currently available:
Market Access Zero Certificates
- KOSPI 200 Index Zero Cert
- ABN AMRO Indonesia Index Zero Cert
- ABN AMRO Middle East Index Zero Cert
- ABN AMRO Pakistan Index Zero Cert
- ABN AMRO Philippines Index Zero Cert
- ABN AMRO Vietnam Index Zero Cert
- DAXGlobal® BRIC Index Zero Cert
- Dow Jones Euro STOXX50® Index Zero Cert
- Dow Jones Turkey Titans 20 Index℠ Zero Cert
- Kuala Lumpur Composite Index Zero Cert
- Nikkei-225 Stock Average Zero Cert
- Shenzhen B-share Index Zero Cert
- Thailand SET 50® Index Zero Cert
Theme-Based Zero Certificates
- RICI® EnhancedSM Commodity Index Zero Cert
- RICI® EnhancedSM Agriculture Index Zero Cert
- ABN AMRO BRIC Infrastructure Index Zero Cert
- ABN AMRO World Farmers Index Zero Cert
- ABN AMRO Climate Change & Environment Index Zero Cert
- ABN AMRO Global Metal And Mining Index Zero Cert
- ABN AMRO Luxury Index Zero Cert
- GPR/ABN AMRO Asia Pacific TOP20 Property Index Zero Cert
- ABN AMRO Shipping Index Zero Cert
You can see that the list provides quite a number of choices to an investor.
These index-linked certs mirror the performance of the underlying index by buying into a basket of index component stocks of a particular country or particular theme. Since the moment is tracked at a gearing ratio of 1, Zero Certs replicate the performance and there is no time decay.
Typically, the certificates have an expiry of about three years. That means if you are holding the cerificates on the expiry date, you will be paid the value of the certificates. It is likely that ABN Amro will create a similar product at that time so that you can reinvest your proceeds into the same market if you so desire.
This part is not so favourable as you will incur trasaction cost. However, according to what I heard from one of the ABN Amro staff, the bank is looking at creating certificates that have a much longer expiry date.
You can refer to the ABN Amro website for more details about this instrument.