Life insurance policies usually have a suicide clause which defines the contestable period if the insured commits suicide. It usually counts from the policy effective date. If the suicide is committed beyond the contestable period, the insurance company is required to pay out the death benefit.

Last Update: 2022-01-07

According to the Common Law, a person will be presumed dead if they have been missing for 7 years, and their relatives cannot establish contact. As a result, the beneficiary can file a claim to the insurance company under such situation.

Last Update: 2022-01-07

A rider is a supplementary contract attached to the basic life insurance policy. The purpose of purchasing a rider is to increase the protection amount and coverage. A rider cannot be purchased individually and it must be attached to a basic policy. If the basic policy expires, the rider will also be terminated.

Last Update: 2022-01-07

No. According to The Code of Practice published by The Hong Kong Federation of Insurers, an agent cannot offer to provide any rebate of the premium as an inducement to any prospective insurance policyholder.

Last Update: 2022-01-07

Generally speaking, it is better to buy child education insurance at an early stage. There are three reasons for this: 1) the health condition of a child is better when they are younger; 2) greater savings for future education use result if insurance is purchased earlier; 3) there is an age limit for this kind of insurance plan. The insurance company may not accept the application if the insured is beyond the age limit.

Last Update: 2022-01-07

A medical examination is not a must when purchasing medical insurance which is subject to the requirement of insurance company. Age, health condition and the sum assured amount are the considerations for the insurance company when deciding whether a medical examination is required. The insured has to declare their health condition and medical history in the application and has to sign as confirmation. Otherwise, the insurance company may claim misrepresentation and non-disclosure to void the policy.

Last Update: 2022-01-07

Although the policyholder has the right to cancel a policy, the insurance company does not. The insurance company is not responsible for refunding the premium if the policy is cancelled by the policyholder. If the policy has accumulated cash value, the policyholder can base on the provision of a non-forfeiture option and ask the insurance company to return the cash value. However, if there is no cash value accumulated upon cancellation of the policy, the policyholder may not receive a refund from the insurance company. For participating plans, if the annual dividends have been accumulated before the policy cancellation, the insurance company has to pay all the dividends to the insured.

Last Update: 2022-01-07

According to Hong Kong law, a person below age 21 is classified as a minor. A minor can buy life insurance but they  need to appoint a trustee who is usually the parents or the guardians.

Last Update: 2022-01-07

There is no geographical limit for the coverage of an insurance policy. Therefore, the insured can still enjoy insurance protection by paying the premium continuously after emigration. As claim applications have to be handled by the office where the policy is issued, you should submit your claim applications to the Hong Kong office since you purchased your insurance in Hong Kong.

Please note that the insurance company may take more time to check the documents and information provided by the insured for claims applications as the accident did not happen in Hong Kong.

Last Update: 2022-01-07

Carefully consider the potential drawbacks of replacing an existing policy, particularly when it involves a lifetime protection.

• Will the new policy provide you with the same level of returns and guarantee values as the existing policy?
• Will you receive continuous coverage from the new policy?
• Will the replacement incur extra charges?
• Will the new policy require an extra medical examination or an increase in premiums?

Last Update: 2022-01-07

When the need for a claim arises, first notify your insurance consultant or the insurance company. They will provide you with information on claim procedures. The claimant will be asked to submit relevant evidence to support their claim.

Last Update: 2022-01-07

• Read the policy carefully and raise any queries to your insurance consultant.
• Let the beneficiary know that they are insured and where the insurance policy is kept.
• Keep the insurance policy document in a safe place. In case a claim arises, you are requested to submit the policy document to the insurance company for claims.

Last Update: 2022-01-07

Inform your investment consultant or directly report to the insurance company immediately.

Last Update: 2022-01-07

Most of the insurance policies provide worldwide coverage. To confirm, check with your insurance consultant or insurance company. If worldwide coverage is provided, you need to inform the insurance company of your new address so that all correspondence can be redirected to you.

Last Update: 2022-01-07

When you invest in a unit trust, your investments are held within a trust structure, separate from the fund manager's assets. The trust's dealings are supervised by an independent trustee and the general supervision of the Hong Kong Securities and Futures Commission, thus offering you asset safety and peace of mind.

Last Update: 2022-01-07

Last Update: 2022-01-07

Normally, a unit trust would either quote in NAV or bid/offer:

• Net asset value = total value of underlying investments less all expenses including management fees
• Offer price
  (price at which you buy) = (Net asset value/no. of units) + front-end fee
• Bid price
  (price at which you sell) = (Net asset value/no. of units) - redemption fee, if applicable

Last Update: 2022-01-07

IPO refers to the first public distribution of stocks from a company that have not been publicly traded before.

Last Update: 2022-01-07

Enterprises can raise new capital for expansion through IPO. It can also raise the publicity of enterprises.

Last Update: 2022-01-07

The Listing Committee of the Stock Exchange of Hong Kong (SEHK) must approve all proposed listing before it could go public. Two essential parties for a listing are sponsors and underwriters. Sponsors are responsible for handling the application procedures and mainly deal with SEHK. Except for some special cases, most of the issuers in an IPO would need underwriters to buy all shares not subscribed by the public.

Last Update: 2022-01-07

You should fill in the application forms that are available in the places specified.

Last Update: 2022-01-07

According to listing rule of SEHK, all enterprises must broadcast to the public for their proposed listing. While main board issuers need to announce in both an English and a Chinese newspaper, GEM board issuers can announce via the Web page owned by GEM Board of SEHK.

Last Update: 2022-01-07

Such information is given in each IPO's application form and prospectus.

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Payment methods for IPO and e-IPO are specified in the application forms.

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For those clients who have applied the IPOs in their own name, subscription results can usually be found in newspapers. If the IPO subscription is applied through us, you can check your allotment result by viewing your trading account on or after the allotment date.

Last Update: 2022-01-07

You can compare the prospects and multiples like P/E ratio of peers in the same industry.

Last Update: 2022-01-07

The primary market is the market in which newly issued securities are offered for sale. The secondary market is the market where existing securities are traded between investors.

Last Update: 2022-01-07

A primary offering refers to an IPO. A secondary offering refers to the public distribution of stocks from a company whose shares have already been listed.

Last Update: 2022-01-07

Book building is a process which usually occurs in placing. All underwriters submit the number of shares and respective prices that they are willing to underwrite.

Last Update: 2022-01-07

A syndicate refers to the underwriters who participate in the same IPO.

Last Update: 2022-01-07

A prospectus is a document showing the formation of and intent to issue shares. It is a legal document stating the purpose of the securities issue, describing in detail the primary business of the issuer, the issuer's financial condition and all matters as well as requirements relating to the IPO.

Last Update: 2022-01-07

A 'Red Herring' is a customary statement, printed in red, on the first page of a prospectus. It is not an offer to sell, but contains the required public disclosures. It is also called the preliminary prospectus. The notice is printed in red on the first page of the preliminary prospectus and on the face of the preliminary offering circular.

Last Update: 2022-01-07

Underwriters are those who undertake to buy all remaining shares of an issuer when the IPO is not fully subscribed by the public.

Last Update: 2022-01-07

A 'cooling-off' period, which is also known as a 'black-out period', refers to the period during which no brokers can issue research reports on the proposed listing enterprise.

Last Update: 2022-01-07

A new issue is the issuance of new shares at the offer price in an IPO. An additional issue is the issuance in addition to the original proposed shares, which often occurs when there is over-allotment.

Last Update: 2022-01-07

There are many types of offering including public offer, placing, introduction and so forth.

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The public offering price is the price per offer share, exclusive of brokerage cost, the SEHK trading fee and the SFC transaction levy at which the offer shares are to be offered pursuant to the share offer.

Last Update: 2022-01-07

A stock option is a contract entered into between two parties, a buyer and a seller. The buyer has the right, but not the obligation, to trade an underlying asset with the seller at a predetermined price, within a certain time.

There are two types of options: a call and a put. The last trade day will be one business day before the final trade day of the contract month. This American-type option can be exercised on or before the expiry date and settled in physical scrip.

*An American-style option can be exercised at any time from its issuance up to its expiration.

Last Update: 2022-01-07

The buyer pays a premium to buy a call option contract, which gives the buyer the right to buy a specific amount of the underlying shares, on or before a future date (expiry date), at an exercise price (strike).

Last Update: 2022-01-07

The buyer pays a premium to buy a put option contract, which gives the buyer the right to sell a specific amount of the underlying shares, on or before a future date (expiry date), at an exercise price (strike).

Last Update: 2022-01-07

The strike price, also known as the exercise price, is the price at which the option buyer and seller agree to trade the underlying stock, if the option is exercised.

A call option whose strike price is below the market price of the underlying stock is in-the-money. Such an option allows the call holder to buy the shares for less than the current market price. A call whose strike price is above the underlying market price is out-of-the-money. Conversely, a put whose strike price is above the underlying price is in-the-money. This means the put holder can sell the asset for more than the current market price. A put whose strike price is below the underlying price is out-of-the-money.

It can be seen from this that only in-the-money options would generally be exercised by their holders because otherwise the holders can buy or sell directly in the market at a better price. If an options strike price equals the price of its underlying asset, the option is said to be at-the-money (sometimes this term is applied to options whose strike price is very close to the underlying market price but not exactly equal).

Last Update: 2022-01-07

Stock options have an exercise period which limits their validity. After the expiry day of that exercise period, the option can no longer be traded or exercised.

Last Update: 2022-01-07

The price at which an option trades is generally called the 'premium', which is the amount of funds that an option buyer pays to the option seller.

The premium is determined by market forces.

Last Update: 2022-01-07

The option sellers are required to deposit a margin, to anticipate daily price risk to cover market price fluctuations.

Last Update: 2022-01-07

You can read the Options Reference Educator and Frequently Asked Questions about stock options provided by HKEx.

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Last Update: 2022-01-07

Discount - The amount by which the price of a stock index futures contract is quoted below the cash market price.

Expiry Day - The business day immediately preceding the last business day of the contract month.

Hedging - Transferring the risk of loss due to adverse price movements through the purchase or sale of contracts in the stock index futures market.

Leverage - The essence of stock index futures trading. Controlling a large investment with a relatively small margin deposit.

Premium - The amount by which the price of a stock index futures contract is quoted above the cash market price.

Last Update: 2022-01-07

In the futures markets, both buyers and sellers are required to deposit an initial margin, which usually amounts to the anticipated daily price risk to cover market price fluctuations. At the end of each trading day, investors' accounts are adjusted according to the value of each contract or marked to market. If the initial margin deposit falls below a stipulated level, namely the maintenance margin, after marking-to-market, a margin call is issued and the investor must deposit additional funds to restore the account to the initial margin level.

Last Update: 2022-01-07

This is the minimum amount of margin in a fund that a client must deposit prior to opening a position. The amount of initial margin is defined by the SPAN calculation from the HKEX or by our company.

Last Update: 2022-01-07

The maintenance margin is 80% of the initial margin.

Last Update: 2022-01-07

If the total equity of your account falls below the maintenance margin level (which is 80% of the initial margin), the available balance in your portfolio will show a debit balance. A margin call to return the equity back to the initial margin level will be required. You are then required to deposit sufficient funds or liquidate your position to satisfy the margin call.

Last Update: 2022-01-07

A maturity date is the date on which a futures contract must be fulfilled.

Last Update: 2022-01-07

No, the return on an investment-linked plan is not guaranteed. This is because the price of the units that you hold may rise or fall depending on the market value of the investment.

Last Update: 2022-01-07

No, you can switch funds anytime and most investment-linked insurance plans waive this charge. However, some of the plans do have a limited number of free fund switches allowed each year, but subsequent switches will be subject to charges.

Last Update: 2022-01-07

Yes, you are allowed to top up your existing investment-linked insurance plan at any time. The top-ups are normally used to enhance the investment portion of both single and regular-premium plans without any change in the insurance coverage. You can also increase the coverage of other insurance riders.

Last Update: 2022-01-07

There is no fixed period of time for you to hold onto your investment-linked insurance plan, but you would pre-define the term according to your investment/saving objective.

Last Update: 2022-01-07

The full amount of the premium paid may not always be allocated to purchase units. Before buying an investment-linked plan, it is important to find out what percentage of your premium would be used to purchase units. This information, commonly known as the allocation rate, is available in the product brochure and/or policy contract.

Last Update: 2022-01-07

You can monitor the investment performance of investment-linked funds by checking the unit prices through your regular plan statement. You can also check your plan performance with your dedicated financial adviser at any time.

Last Update: 2022-01-07

As with all life insurance policies, after purchasing an investment-linked plan you will have a cooling off period to review your plan. If you decide that the plan is not suitable for your needs, you can cancel it. The insurer will refund all of the premiums that you have paid within the cooling off period (with adjustments for any changes in the market value of the investments).

Last Update: 2022-01-07

China B-shares are basically stocks of enterprises that are registered in the PRC and listed on either the Shanghai or Shenzhen Stock Exchanges in specific foreign currencies.

The currency used in Shanghai B-shares is USD and the currency used in Shenzhen is HKD.

Last Update: 2022-01-07

Originally, B-shares listed enterprises were companies which required foreign currencies for their operations, and the B-shares market was only open to foreign individual or institutional investors. Since February 2001, the B-shares market has been open to mainland citizens who possess foreign currencies. B-shares have been redefined to be shares which are listed in China, but are traded in specific foreign currencies.

The A-shares market is only open to mainland citizens and Qualified Foreign Institutional Investors (QFII), and the denominated currency is RMB.

H-shares are stocks of enterprises that are registered in the PRC and also basically operate in the PRC, but are listed on the Hong Kong Stock Exchange.

Some enterprises have issued more than one kind of the above-mentioned shares.

Last Update: 2022-01-07

Enterprises which have recorded two consecutive fiscal losses. Their listed A / B shares are distinguished by the category ST (Special Treatment) shares. Their daily price fluctuation is limited to 5% of the closing price of the previous trading day.

Last Update: 2022-01-07

For enterprises which have recorded three consecutive fiscal losses, their listed A / B shares have to be distinguished by the category PT (Particular Transfer) shares. The trading day for PT shares is only on Friday. Price fluctuations are restricted to an upper limit of 5% above the closing price of the previous trading day, but there is no lower limit.

Last Update: 2022-01-07

A structured note is a hybrid investment consisting of two major components. It is a derivative and a straight debt instrument (most are in the form of a tranche of European Medium Term Note Programme while others are in the form of a debt instrument issued by international financial institutions with strong credit standings). It can provide an investment return linked to the price performance of a myriad of possible indices, equities, rates or other underlying assets. Except for principal protected notes, at maturity, most structured notes may deliver the physical underlying asset to the investor.

Before investing in structured notes, it is important to understand the risks associated with derivative instruments, and the impact of their performance under both positive or adverse market conditions.

Last Update: 2022-01-07

The interest rate of a similar money market instrument and the premium of underwriting the risks of price volatilities in the market of the underlying asset.

Last Update: 2022-01-07

Based on the risk tolerance and the view of the price performance of the underlying asset, an investor can choose principal protected notes, 'Bull' ELNs and callable daily range accrual notes to meet their investment objectives, while matching their risk profile.

Last Update: 2022-01-07

Primary international financial institutions and investment banks that are active players in the markets issue structured notes. In the primary markets, structured notes are originated by these international financial institutions and offered to investors through the private banking firm and securities dealer distribution networks. Investors can tailor their own structure of notes to meet their investment objectives and match their risk profile. The minimum investment amount for structured notes in the primary markets is HK$1,000,000.

Last Update: 2022-01-07

Most structured notes are traded in the secondary markets after they are successfully issued in the primary markets. There are hundreds of structured notes outstanding for investors to buy and sell in the secondary markets. In most circumstances, issuers will provide bid and offer prices in the secondary markets for notes issued by them. That means that investors can achieve better protection on their own investment in the case where a position must be liquidated when the market moves against them. The minimum investment amount for notes in the secondary markets is as little as HK$100,000.

Last Update: 2022-01-07

There is an abundant choice of underlying assets linked to structured notes. They may be linked to a group of mutual funds, hedge funds, interest rates, an equity index or group of indices, or a basket of selected stocks.

They offer flexibility in the redemption period. If the value of the notes appreciated during the determined investment period, investors can redeem their note in the secondary market at any time to maximise profit. On the other hand, if the value of the notes differs from what the investors have anticipated, they can also redeem their note in order to minimise their loss.

Last Update: 2022-01-07

Last Update: 2022-01-07

A bond is a debt security. It is a loan agreement between a bond issuer (borrower) and bond investor (lender). When you purchase a bond, you are lending money to a government, corporation, or other entities known as the issuer. In return for the loan, the issuer promises to pay you a specified interest rate during the life of the bond and the principal is returned to the bondholder upon maturity of the bond.

Last Update: 2022-01-07

Last Update: 2022-01-07

The basic value of a bond price is an application of the discounted cash flow techniques. The price of a bond equals  the present value of all future cash flow, including expected coupon (C) (interest income) and the final redemption amount (F) by the discount factor. The discount rate used is the yield to maturity (YTM) which is simply the geometric average of the one-year forward rate for the life of the bond. If the YTM is not known, but the market price is available, the calculation can proceed in reverse.
Bond price	=
Example:
Issuer		ABC Limited
Coupon		7%
Coupon frequency (per year)		1 (annual)
Rating		A3
Issue date		Jun 1, 2007
Maturity date		Jun 1, 2012
Currency		HKD
Redemption amount		100%
Assumption: The expected yield to maturity (discount factor) is 8% per annum. The yield of a five year Exchange Fund Note is 5% per annum. What is the price of the above bond if you buy it at the new issue for HK$1,000,000?
Bond price	=
	=	96.01%
Illustration:
	Date	Cash received	Cash flow (present value)
1st coupon date	6/1/2008	US$7,000.00	US$6,481.48
2nd coupon date	6/1/2009	US$7,000.00	US$6,001.37
3rd coupon date	6/1/2010	US$7,000.00	US$5,556.83
4th coupon date	6/1/2011	US$7,000.00	US$5,145.21
5th coupon date and final redemption date	6/1/2012	US$107,000.00	US$72,822.40
	Total:	US$135,000.00	US$96,007.29
If the coupon rate = yield to maturity (discount factor), the bond will be priced at par.
If the expected yield to maturity goes up or down, what will happen to the bond price? If the yield to maturity goes up, the price of the bond will go down. When the yield to maturity is 8%, which is higher than the coupon rate (7%), the bond will be priced at discount. When the yield to maturity goes down (drops to 6%), which is lower than the coupon rate (7%), the bond price will then be priced at a premium.
The calculation is shown as follows:
Bond price	=
	=	104.21%
Bond price	=
	=	92.22%
The bond prices shown in the financial pages are not the price that investors pay for the bond. This is because the price does not include the interest accrued between the coupon payment dates. If 50 days have passed since the last coupon payment, and there are 365 days in the coupon period, the bond seller is entitled to a payment of accrued interest of 50/365. Referring to the above example, if the coupon is 7% per annum, the accrued interest will be US$7000 x 50/365 = US$958.90

Last Update: 2022-01-07

This is a contract binding the bondholders and bond issuers into the bond issue for a specified term. Generally, the document provides the following information:

• Description of the bond
• Terms and conditions of the bond
• Business overview of the issuer
• Financials of the issuer
• Use of proceeds


Investors are recommended to pay attention to the above information. Key parts of the notes have been stated in this document. Also, in the case of a credit event, the arrangement will be followed according to the bond indenture.

Last Update: 2022-01-07

The yield curve is the graph showing the term structure of interest rates. Yields on bonds with different maturities but with the same qualities are plotted. If short-term interest rates are lower than long-term rates, it is called a Positive Yield Curve. If short-term rates are higher than long-term interest rates, it is called an Inverted (or Negative) Yield Curve. If there is little difference between short-term and long-term interest rates, it is called a Flat Yield Curve. When the economy shows a Positive Yield Curve, this means that buying bonds with longer maturities can enjoy higher returns than a short-dated one. When the economy shows an Inverted Yield Curve, the market expects long-term interest rates to decline. Investors can purchase short-dated bonds to replace the long-dated issues and it may imply a recession is coming. When the economy shows a Flat Yield Curve, this means that the reward on extending maturities is relatively small. Investors will choose to stay in the short-dated end of the maturity range.

Last Update: 2022-01-07