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Renminbi Services
Renminbi Non-Deliverable Forward (RMB NDF)
RMB NDF helps hedge your exchange rate risk13 and achieve your investment objectives in RMB14
- Renminbi Non-Deliverable Forward is a currency exchange derivative product13, with the customer and the Bank agreeing on a rate for the exchange of a pre-determined amount of Renminbi (RMB) on a fixed date in the future
- Both the customer and the Bank are obliged to exchange a pre-determined amount of RMB at the agreed forward exchange rate on that agreed date in the future
- The transaction is settled by making a net payment in US dollars in proportion to the difference between the agreed Renminbi forward exchange rate and the subsequent Renminbi settlement rate at that fixed date in the future
- There is no physical delivery in RMB
- There are 2 types of RMB NDF contracts available:
- Buy expected RMB - if you hold the view that RMB would appreciate and the expected future market exchange rate is higher than the agreed forward exchange rate
- Sell expected RMB - if you hold the view that RMB would depreciate and the expected future market exchange rate is lower than the agreed forward exchange rate
RMB NDF FEATURES
| Reference Currency: | Renminbi (RMB) |
| Settlement Currency: | US dollar |
| Notional Contract Amount: | Minimum USD 10,000 |
| Tenor: | 1, 2, 3, 6 and 12 months15 |
| Contract Types: | 1. Buy RMB ( for customers with the view that RMB will appreciate and that the expected future exchange rate will be higher than the forward exchange rate) 2. Sell RMB (for customers with the view that RMB will depreciate and that the expected future market exchange rate is lower than the agreed forward |
| Deposit Lien: | HKD or USD deposits, equivalent to 25% of the notional amount of the RMB NDF contract. The deposits can be in either savings or time deposits, which will continue to earn interest for you. |
Example
A customer enters into an RMB NDF contract to buy RMB and sell USD20,000 to the Bank in three months' time at an agreed rate of USD1.0:RMB 8.0 (the spot rate for USD1.0:RMB is 8.2). Through the transaction, the customer is hedging the risk of RMB appreciation by securing the cost of buying RMB when the contract expires.
- If RMB appreciated during the period to USD1.0:RMB7.5 on the Valuation Date, the customer would realize the gain of USD1,333+.
- On the other hand, if RMB depreciated to USD1.0:RMB8.5 on the Valuation Date, the customer would suffer a loss of USD1,176+.
+ At settlement, the profit and loss of your RMB NDF is calculated by the following formula:
Market Situation Monitoring16
If due to market fluctuations, the value of your deposit lien falls below 10% of the notional amount of the contract, we shall remind you of your latest contract position and keep you informed, so you can make timely decisions17.
You would have a choice of whether or not to (1) close-out the contract by placing a reverse contract or (2) increase the deposit lien by 15% of the notional amount of the contract.
When the value of your deposit lien falls below 5% of the notional amount of the contract, the contract will be forced closed-out18.
Important Risk Warning:
This is a derivative product. Investment decision is yours but you should not invest in Renminbi Non-Deliverable Forward unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
Renminbi Non-Deliverable Forward is NOT equivalent to a time deposit.
Issuer's Risk - you rely on HSBC's creditworthiness. The product is subject to both the actual and perceived measures of the credit worthiness of the Bank and there is no assurance of protection against a default by the Bank in respect of its payment obligations. Upon insolvency of the Bank, the investor may get nothing back and the potential maximum loss could be 100% of investment amount and no return received.
Risk Disclosure Statement
This statement is provided to you in accordance with the Code of Conduct for persons licensed by or registered with the Hong Kong Securities and Futures Commission.
The risk of loss in Leveraged Foreign Exchange Trading can be substantial. You may sustain losses in excess of your initial margin funds. Placing contingent orders, such as "stop-loss" or "stop-limit" orders, will not necessarily limit losses to the intended amounts. Market conditions may make it impossible to execute such orders. You may be called upon at short notice to deposit additional margin funds. Your foreign exchange position and the relevant collateral may be liquidated without your prior consent. You will remain liable for any resulting deficit in your account. You should therefore carefully consider whether such trading is suitable in light of your own financial position and investment objectives.
Notes
13 This product is not for speculation.
14 Gains/losses of the RMB NDF contract are dependent on the contract forward rate.
15 Customers are expected to hold the RMB NDF contract for the full term of the tenor, until its Settlement Date.
16 The Bank will check the RMB exchange forward rate once every business day (HK) at a time determined by the Bank for the customers.
17 If the Bank cannot reach you in the first instance, 2 call attempts will be made over 2 working days.
18 If due to a drastic drop in currency value such that value of the deposit you place with us falls under 5% without first hitting 10% of the notional amount of the contract, the contract will be closed-out immediately without first contacting you.
