Credit Lyonnais in Hong Kong is structuring an equity-linked note whose performance is linked to China's B-share market, a structure the firm believes is the first of its kind. Due to regulatory constraints, this structure provides local investors with an easier way to access the B-share market, according to Vishal Tourani, equity derivatives analyst at CL in Hong Kong. "We're aggressively promoting the product," he added.
The structured note, dubbed Rodeo (Return or Discount Equity Option), is similar to an ELN but packaged as a warrant. Unlike a warrant, which offers only upside exposure, the Rodeo also limits downside risk, Tourani explained.
In a sample Hong Kong dollar-denominated transaction based on shares in China Vanke, the Rodeo pays an annual yield of 36.29% if the reference share is above a predetermined cap level.
Tourani said the notional size, underlying stocks and maturity would be up to the client.
"China's in fashion right now," said a trader at a rival firm. He added that anything China-related is hot this year, including structured instruments.
To see an indicative term sheet, click here to download in PDF format.
