Martin Lee @ Sg
Sharing is Caring!

JP Morgan Asia Confidence Notes

The JP Morgan Asia Confidence Notes is a structured product linked to the market indices of four Asian countries: Singapore, China, Hong Kong and Taiwan.

It offers a potential 7.2% p.a. coupon payout. The offer period is from 4 August 2008 to 29 August 2008 (noon) and the minimum subscription amount is $50,000.

Whenever you are thinking of buying any structured product, it is important to read the product prospectus to find out what are the risks involved. Click the link below for the prospectus.

JP Morgan Asia Confidence Series 3

How the notes work is that there is an initial strike and barrier level which is 100% of the inital index. The trigger level is defined as 50% of the initial index level.

A valuation date occurs every quarter. Coupons are payable every quarter.

A mandatory redemption event occurs when all four indices close above the barrier level. This can occur on one valuation date or on separate valuation dates.

For example, if Singapore and Taiwan close above their barrier levels on the first valuation date while China and Hong Kong close above their barrier levels on the second valuation date, the mandatory redemption will kick in.

If the mandatory redemption occurs, you will be paid a final coupon and your principal will be returned.

The (huge) downside of this product occurs if any of the four markets fall below their trigger levels on any of the valuation dates. If no mandatory event occurs before the maturity of the product, a formula is used to calculate how much money you will get back. Based on the formula, there is a high chance you will not get back any of your principal (Refer to scenario 4 of page 11).

Since you will be paid the coupon for the whole duration (2.5 years) of the product, what you do get back is approximately 18% of your principal in the form of 10 quarterly coupon payements.

Some other risks to the investor include:

  • Credit risk of JP Morgan
  • Volatility of the index
  • The notes are non-liquid
  • Certain unknown factors might trigger an early redemption of the notes which will be priced at “fair market” value

The JP Morgan Asia Confidence Notes is distributed by HSBC and Standard Chartered Bank.

Click here to leave a comment.

Leave a Comment:

Notify me of followup comments via e-mail. You can also subscribe without commenting.

10 comments
david goo says 10 years ago

Hi,

I would consider selected single premium insurance products as low risk as well. The lowest risk free product would be Singapore governement bonds.

Reply

Reply
    david goo says 10 years ago

    so sorry!? Somthing happens before I finished my reply, so let me continue,,: ) I happen to share Chee’s comment, so base on his comment what would your high chance prediction be. More over I can only think of the only high chance of losing my principal is putting with the Singapore pools. Plse advise thx
    wmt rgds

    Reply
      lioninvestor says 10 years ago

      Hi David,

      The high chance in my post is with reference to what happens to the principal after scenario 4 occurred.

      IF scenario 4 happens, the principal will be more or less wiped out.

      As to what are the chances of scenario 4 occurring, I can’t really give you any numbers now.

      Reply
david goo says 10 years ago

Based on the formula, there is a high chance you will not get back any of your principal. What High chance are we talking about? in % :- 50% ,75% what? therefore one should not invest in them is that it? that leads me to another question…given the present financial economic climate would you say which other investments have low chances of losing the principal(other than parking in FD/saving account or bonds? would appreciate if you revert.thx

Reply
    lioninvestor says 10 years ago

    Hi David,

    I am referring to the case of scenario 4 (refer to page 11).

    In that event, the investor will end up with only the coupon payments and very little (almost nil) of his capital.

    So that is the worst case scenario for this product.

    I would consider selected single premium insurance products as low risk as well. The lowest risk free product would be Singapore governement bonds.

    Reply
      chee says 10 years ago

      Hi Lioninvestor ,

      For JPMorgan AsiaConfidence Note-Series1, so far there is no Trigger event and the worst is already over i.e. it is not likely to have Trigger event by end of 2010.
      Hence, most likely , the Scenario 2 will be applied.

      rgds

      Chee

      Reply
Victor Lim says 10 years ago

I purchased this structured deposit few months back.
With the market uncertainty next year, how can I know the risk and performance of the 4 indices.

Reply
    lioninvestor says 10 years ago

    Hi Victor,

    It is likely that the 50% barrier has been breached. If the 4 indices do not recover to be above the initial price on any of the valuation dates, you could be looking at a big loss in capital.

    Reply
lioninvestor says 11 years ago

I would rather much prefer a gold-backed currency system than the fiat system.

The printing press devalues even the cash we hold. Nothing is safe. 🙂

Reply
Dorai says 11 years ago

OCBC, UOB Preference Shares or JP Morgan Asia Confidence Notes ………or whatever it is, I rather be safe than greedy!…..watch your principal as Cash is King!
I have shun away UNIT TRUSTs and I believe that “IN GOD WE TRUST!

Reply
Add Your Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.