Gold-linked structured deposits have returned to the Hong Kong market after an absence of two years. Hong Kong's Securities and Futures Commission (SFC) approved Heng Seng Bank's non-capital protected gold-linked deposits (GLDs) in early December, making it the first gold-linked structure approved locally in the past two years.
Hang Seng's Gold Linked Deposits is a growth product linked to the price performance of the Loco London gold share. The bank said that the product was designed for investors with a stable or moderately bullish view on the price of gold because of the deposit term of the products.
Unlike other non-capital protected gold-linked structured deposits seen previously in Hong Kong, Hang Seng GLDs does not offer physical delivery of the gold at maturity. Instead, the final payment can be settled in paper gold if the put options are triggered at maturity under the reverse convertible structure. At the start of the investment, investors can choose to invest either with a cash amount of the initial capital or an equivalent amount of paper gold.
Hang Seng Bank marketed the Gold-Linked Capital Protected Investment Range Deposit (American) and the Gold-Linked Capital Protected Investment Deposit (European) in September 2009.
According to SRP's database, prior to 2010, a number of gold-linked structured product issuers issued products in Hong Kong including Bank of China (Hong Kong), Bank of East Asia, Chiyu Bank, HSBC, Nangyang Commercial Bank.
SRP data also shows that Bear Stearns issued a certificate linked to gold while DB Platinum Advisors and Celsius Funds issued a few fund-wrapped products linked to the performance of the gold price.