Asia Focus

Autocallable Phoenix note on Japanese smart farming stocks

Product Rationale

In March 2014, Japan’s Ministry of Agriculture and Fisheries announced a set of guidelines for ‘secure robots and agricultural machinery safety’. That quickly translated to extensive investment in research and development from the leading domestic high-tech firms.

Japanese authorities have engaged in a cutting-edge modernisation of their agricultural system known as ‘smart farming’, and aimed at saving an obsolete and unattractive industry. As can be expected in Japan, technology is to play a major role in this change. Harvesting robots, self-driving tractors, fertilizer-spraying drones, computerised planting, cloud-available consumer information, greenhouses control tablets are coming to the fields. Huge economic benefits are expected, ranging from improvements in productivity and reliability, standardisation of product quality, attracting eager young farmers, down to more transparent disclosure of information to end consumers on what ends up in their shopping bags.

The implications in terms of technological developments are enormous, and the authorities ensure that the benefit is passed primarily to Japanese high-tech firms. Smart farming is turning Japan’s agriculture into a growth industry.

Product Description
  • Issuer: Commerzbank AG
  • Maturity: 3 years
  • Currency: quanto JPY
  • Underlyings:

Underlying name

Bloomberg ticker

Topcorn Corporation

7732 JP Equity

Itochu Techno-Solutions Corp.

4739 JP Equity

  • Coupon: 9.5% p.a.
  • Coupon barrier: 60%
  • KO barrier: 100%
  • Daily KI barrier: 60%
  • Put strike: 100%
  • Quarterly pay-off:
    • For the first coupon payment, client receives coupon
    • For subsequent coupon, if Worst of Performance is at or above coupon barrier, client receives coupon. Otherwise client receives 0
  • Early termination:
    • If on any quarterly observation date, Worst of Performance is at or above KO barrier, client receives coupon (if any) and note is early redeemed
  • At maturity (if early termination has not occurred):
    • If Worst of Performance is at or above put strike, client redeems 100% of note
    • If Worst of Performance is below put strike and Worst of Performance has never fallen below daily KI barrier on any observation day, client redeems 100% of note
    • Otherwise, client receives a number of shares of the worstperforming share equal to the denomination of the note divided by the worst-performing share’s strike price
  • Worst of Performance (t): Performance of the worst-performing share on observation date (t)
  • Performance of a share: Price(t) / Price(initial)
Key Benefits
  • Investor’s capital is protected by a low daily KI barrier of 60%
  • Investor receives a high conditional coupon of 9.5% p.a.
Key Risks
  • In a strongly trending equity market, the investor potentially receives a lower return from the note than compared to investing in the underlying stocks themselves
  • The investor is subject to the issuer risk of Commerzbank
  • Capital invested is fully at risk
  • Please also refer to Additional Risk Disclosures below

Additional Risk Disclosures 
Before investing in this product, investors should carefully consider its appropriateness and suitability, and the following additional risks: 1. Issuer Risk: Any failure by the issuer to perform its contractual obligations, when due, may result in the loss of all or part of the invested capital. 2. Counterparty Risk: Any failure by Commerzbank AG to perform its contractual obligations, when due, may result in the loss of all or part of the invested capital. 3. Market Risk: Various market factors may affect the value of the investment or the underlying assets, including but not limited to the impact of volatility, interest rates, dividends (if any), foreign exchange. 4. Liquidity/Secondary Market Risk: Under normal market conditions Commerzbank will endeavour to provide a secondary market price. However, Commerzbank has no obligation to make a secondary market in the instruments concerned. Accordingly, under some circumstances, the secondary market for the investment may be limited and subject to wide bid/offer spreads. 5. Reinvestment Risk: The risk that the investment redeems prior to maturity at a time when reinvestment opportunities are not favourable for the investor. 6. Redemption Risk: The risk that the investor may receive substantially less than the amount invested, if they liquidate the investment prior to maturity. 7. Tax Risk: There may be tax implications based on where the investor resides. Please consult a tax professional before investing. 8. Legal Risk: There may be legal restrictions depending on where the investor is domiciled. It is advised to seek legal guidance prior to investing. When specified, the terms ‘guaranteed’ and ‘protected’ are subject to the creditworthiness and solvency of Commerzbank and although financially strong there is the possibility that returns may not be met in the unlikely event of a Commerzbank failure. For additional information on the product features and key risks, please contact your sales advisor or refer to the contacts page.