Asia

China: CES China Private Elite Index Premium Certificate

Index Rationale

China’s growth has long been associated with manufacturing and product assembly. It is now shifting its focus to science and technology to fuel its economy, expected to contribute 60% to the country’s economic growth by 2020. New economy such as information technology and services has grown hugely in the past years and is expected to have more fruitful years to come.

Meanwhile, private companies are now becoming the engine of China’s growth. Currently, Tencent and Alibaba are ranked as the fifth and sixth most valuable publicly listed technology companies in the world respectively after Apple, Alphabet, Microsoft and Facebook. Also these non-state-owned enterprises (non-SOEs) have been very profitable, without being excessively leveraged compared to the SOEs.

CES China Private Elite Index picks the best of both worlds, selecting 30 private companies stocks from Hong Kong and US exchange. Screening criteria include more than 50% revenue generated from China and less than 20% state-owned, accompanied with good liquidity and sizable market capitalisation.

Pricing Comparison

The following is a comparison of returns of backtested results on a premium certificate with 2823 HK Equity versus CESCPE Index as the underlying.

CESCPE Index

2823 HK Equity

Average

109%

97%

Median

116%

96%

Minimum

72%

59%

Maximum

116%

113%

Backtesting results show that generally a premium certificate on CESCPE Index will give better coupon and return over the past seven years.

Chart 1: Backtested returns on a premium certificate with 2823 HK Equity versus CESCPE Index as the underlying
Chart 1: Backtested returns on a premium certificate with 2823 HK Equity versus CESCPE Index as the underlying
Source: Commerzbank, Bloomberg
Product Description
  • Issuer: Commerzbank AG
  • Maturity: 1 year
  • Currency: quanto USD
  • Underlying:

Underlying name

Bloomberg ticker

CES China Private Elite Index

CESCPE

  • Bonus coupon: 16%
  • At maturity:
    If CESCPE Index closed below 100%,
    pay-off = closing price of CESCPE on final valuation date/initial price
    Else: Pay 100% + bonus coupon
Key Benefits
  • Unique offering of exposure to Chinese private companies
  • Investor receives a high potential upside of 16% 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 stock itself
  • The investor is subject to the issuer risk of Commerzbank
  • Capital invested is fully at risk
  • Please also refer to Additional Risk Disclosures below

Backtested or hypothetical simulated returns are not indicative of future results. Hypothetical performance results have many inherent limitations and were achieved by means of a retroactive application of a model designed with a benefit of hindsight. The results do not represent the results of actual trading using client assets, and the strategy depicted did not exist during these time periods. No assurance can be given that any financial instrument or strategy described herein would yield a favourable investment result.

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.