Equity-linked note (ELN / ELI) is one of the most popular structured products in the market for investors looking for yield enhancement, which can be further divided into "bullish", "bearish" and "hybrid" notes.
Performance of an individual stock, a specified lot of stocks or a stock index.
Equity-linked instruments, equity high-yield note, equity-linked fixed coupon note, equity-linked range accrual note, cumulative option contracts.
- Investors are subject to the risks of stock price fluctuations, the effects of dividends and corporate actions. When the note expires, they may receive the underlying stock or receive the cash amount that is less than the original investment amount. It may lose some or all of the principal, resulting in loss of partial.
- Equity-linked note is not listed or traded on any market managed by the Hong Kong Exchanges and Clearing Limited or any other stock exchanges. Although some issuers offer secondary market trading, investors may need to bear the loss on the spread if selling before the maturity date.
- Investors would bear the credit risk of the issuer or the guarantor. If the issuer or the guarantor is bankrupted or closed down, the investment principal may be suffered, and it may lose part of or all of the principal.
There are many types and forms of structured products. Investors should beware the following investment risks, including but not limited to:
- Credit risk: The credit risk of the issuer or guarantor of a structured product. When the issuer or guarantor goes bankrupt or fails, even if it is a principal-protected product, the investment principal will still cause losses;
- Liquidity risk: Structured products generally do not provide a secondary market. Due to the lack of a secondary market, investors might able to unwind transactions at the bid price that is determined by the issuer and the transparency is low.