What is a CBBC?

CBBC is a kind of financial derivative instrument of options. If you first know CBBC, you can master its two attributes.

First, since it is a derivative, like warrants and options, the most obvious feature is leverage, high risk and high return.

Second, the biggest difference between CBBCs and nest wheels and options is that CBBCs have a compulsory recovery mechanism. once the relevant asset prices tracked reach the agreed recovery price, the relevant CBBCs will be stopped from trading and forcibly withdrawn.

The naming method of CBBC

Let's take the cow certificate of "Tencent Faxing one and two cattle B.C" as an example to see that the naming of the cow-bear certificate should not be frightened by this seemingly heavenly nomenclature. The naming is regular and can be seen at a glance.

A, the first two words are the name of the stock. The main stock of this CBBC is Tencent, which represents the trend of Tencent tracked by this CBBC.

B, the two words among them are the abbreviations of the investment bank that issued the CBBC. The third party issue of this CBBC is Societe Generale.

C, the last two words are the year and month in which power is exercised. Bajia, which means that this CBBC will be exercised in February 2021.

D, the first letter, represents that the investment bank has issued multiple CBBCs with the same exercise time for this asset, but the exercise conditions are different (such as exercise price), which are distinguished by letters.

F, the last letter, "C" indicates a cow certificate, and a bear certificate uses a "P", which is the abbreviation of Call and Put.

The risk of CBBC

For the CBBC, the most important message is its recovery price. You can see that the recovery price of the CBBC is HK $380, which means that once Tencent falls to HK $380 at some point, the CBBC will immediately stop trading and be withdrawn by the issuer. The original expiration date, February 25, 2020, will no longer be valid. It can be simply understood that once the line is touched, it will be forcibly recycled.Compulsory withdrawal is the key to distinguish CBBC from warrants.。

Continue to take Tencent as an example, after the stock price rose sharply, there was a correction in the last two trading days, and the share price fell back to HK $485. as a result, you can see that on June 26, 2020, many bull certificates whose recovery prices were less than 490 were withdrawn and trading was terminated.

CBBCs are divided into two categories, Category N (with no balance) CBBC will have no value when it is recovered, and Category R (with balance) CBBC may get part of the residual value or lose all money after it is withdrawn.

The formula for calculating the residual value of Class R CBBC is as follows:

For example, if there is a bull certificate, the recovery price is 22350 and the exercise price is 22250, and if the Hang Seng Index falls to 22350 on a certain trading day, and the lowest value falls to 22300 on that day, then the residual value of the bull certificate per share is (22300-22250) / 10, 000 million HK $0.005, which is more than 95% lower than the current price of 0.18 yuan. If the Hang Seng Index falls below 22250 at the lowest level that day, then there will be no residual value. If there is a surplus value, the relevant settlement amount will be automatically transferred to the Central Clearing House about 3 settlement days after the valuation, and then automatically transferred to the securities account of the investor.

Therefore, when investing in CBBCs, do not take any chances. Once recovered, huge losses will occur immediately, even if there is surplus value, so generally speaking, you can choose CBBCs that are far away from the recovery price. In this way, the risk is smaller, but the leverage is also smaller, which depends on the risk preference of investors.

Whether a bull-bear certificate is in category R can be confirmed by its listing documents in the individual stock announcement. For example, 60939 of the above is Class R, and at present most CBBCs are Class R.

牛The advantages of bear certificate over warrants

The disadvantages of CBBC are obvious, but its advantages must also be emphasized. In the factors that affect the price trend, compared with warrants, the pricing factor of CBBC is simpler, and there is no phenomenon that the extended volatility leads to the opposite of the stock price. For example, many investors may have the following painful experience: they bought a certain stock because they were bullish, and then the stock really rose, but the price of the subscription wheel actually fell instead of rising. This is caused by the extended volatility.

The basic elements of CBBC

When issuing CBBCs, investor banks are required to submit issuance documents to the HKEx, which will contain all the basic elements of CBBCs, which are as follows:

A, CBBC Securities Code: when each CBBC is listed, the HKEx will assign it an independent code, with a code range of 57000-69999, and the code of Tencent Faxing No.1 and Erniu B.C is 6119.

Liquidity provider broker number: according to the regulations of the Hong Kong Stock Exchange, every CBBC must have a market maker to provide a quotation, that is, flow b and flux provider. The market maker can be either the issuer himself or entrust by the issuer to provide quotations to other institutions. This broker number is the broker number of the market maker. Take Tencent Societe Generale B.C as an example, 9703 represents that the market maker is Societe Generale.

C. Issue amount: it means that the total number of CBBCs issued by Societe Generale Bank is 300000000, but not all of them have been sold to the market from the first day of listing, depending on the supply and demand of the market. For most CBBCs, the issuer may not be able to sell his full share to the market before the whole CBBC expires, and even if he can sell the full share, the issuer can continue to create CBBC. Theoretically, the supply of CBBC is unlimited, and there is basically no possibility that a single CBBC can be manipulated.

D, form / type: European cash settlement R, "European cash settlement" means that if the CBBC has exercise value when it expires, the issuer will settle the cash difference to the investor according to the price difference and will not give the investor the underlying asset. European CBBC can only be exercised on the maturity date, not during the holding period. According to Zhitong Financial APP, category R shows that CBBCs may have residual value if they are withdrawn. All CBBCs issued in Hong Kong are European cash settlement Category R.

E, category: cattle, indicating that the cow-bear certificate is a cow certificate.

F, company: Tencent Holdings, indicating that the underlying asset of the CBBC is Tencent.

G, buying and selling unit: 5000 CBBCs, indicating that one CBBC is 5000.

H. The issue price of each CBBC (HK $): HK $0.25, which is the issue price determined by the issuer for the CBBC. According to the rules of the Hong Kong Stock Exchange, the price of CBBCs must not be less than HK $0.25 per share. It should be noted that the issue price is not the final secondary market transaction price. The issue price is generally determined based on the intrinsic value of the CBBC (the difference between the underlying current price and the exercise price) plus the financial expenses of the issuer.

I. The cost of capital for each CBBC on the launch date (HK $0.2292). The cost of capital is also known as the financial fee, which is the cost and reasonable profit of the issuer issuing the CBBC. It is generally based on the Hong Kong interbank offered rate plus a specific percentage.

J, exercise price: 377, that is, the exercise level. If the CBBC is held until maturity and is not withdrawn, the CBBC investor can conceptually buy (CBBC) / sell (Bear) the price level of the underlying asset at that exercise price. However, in real transactions, the amount will be returned to investors after cash settlement.

K, the redemption price: 380. if Tencent falls to 380, the issuer will forcibly withdraw the bear certificate. Due to the price difference between the recovery level and the exercise level of the bear certificate, it belongs to Class R CBBC, and investors may get part of the surplus value.

L. Cash settlement payable for each trading unit at maturity (if any): if the CBBC is not withdrawn at maturity, the CBBC will be exercised and the investor will receive the cash difference after the exercise approximately 3 trading days after the maturity date.

M, launch date: even if the issuer launches the CBBC, the issuer will upload the issuance document to the HKEx on the same day.

N, issue date: is the date on which the CBBC was officially issued by the issuer.

O, listing date: it is the first day that the CBBC is officially listed on the Hong Kong Stock Exchange.

P, observation start date: the same day as the listing date. The observation period refers to the period from the first listing date of the CBBC to the last trading day, during which the issuer will observe whether the CBBC is forcibly withdrawn.

Q, valuation date: the trading day immediately before the expiration date, which is the benchmark date for exercise settlement.

R, maturity date: refers to the expiration date of the CBBC, which is not the same day as the last trading day, and the last trading day of the CBBC is generally the day before the expiration date.

S, settlement date: the ultimate fate of CBBC is divided into two types, one is to be forcibly withdrawn before maturity, and the other is to trade until the end of the trading day. In the first case, after the CBBC is withdrawn, if there is any residual value, the residual value will be returned to the investor about 3 trading days after the recovery date; in the second case, the CBBC will be traded until the last trading day and the investor will exercise the right, the difference in cash after the exercise will be received about 3 trading days after the maturity date.

Settlement currency: Hong Kong dollars, Hong Kong CBBCs are all settled in Hong Kong dollars.

U, the actual leverage ratio (effective leverage ratio): 3.10 times. The actual leverage ratio refers to the multiple of the rise and fall of the CBBC compared to the underlying stock. In the case of Tencent Law Xing Yi Niu B.C, that is, Tencent's stock rises by 1%, and the bull will rise by 3.10%. However, the actual leverage ratio is not a constant, it changes with the price of related assets and CBBCs.

V, leverage ratio: 3.10 times, the actual leverage ratio of CBBC is the same as leverage ratio.

W, premium: CBBC premium means that after investors buy CBBCs, if they hold them to maturity, how much the asset prices of CBBCs need to rise / fall in order to make CBBCs investors fight and leave the market. The premium of CBBC can also be understood as the actual value of the financial fee charged by the issuer. If CBBCs with the same recovery price and different maturity dates are forcibly withdrawn, investors who hold CBBCs with lower premium will lose less in financial costs than those with higher premium.

Three main points of selection of Hang Seng Index CBBC

When investing in Hang Seng Index CBBCs, investors should first judge the future trend and direction of Hang Seng Index, and then pay attention to the relationship between convertibility ratio and face value and the change of leverage ratio among the many choices of Hang Seng Index CBBCs.

First of all, there are many options for the exchange ratio of Hang Seng Index CBBCs in the market. Different exchange ratios affect the sensitivity of CBBCs to changes in the Hang Seng Index, as well as their face value. In the same price region, the smaller the exchange ratio is, the higher the sensitivity of CBBC is. In the higher price region, the Hang Seng Index CBBC needs more changes in the Hang Seng Index to jump to a price level. If the HSI CBBCs are in different price regions, the exchange ratio is difficult to directly distinguish the sensitivity of CBBCs.

Secondly, the face value of CBBC, that is, the price, is mainly affected by the exchange ratio. If other factors (such as exercise price and maturity date, etc.) are the same, the greater the convertibility ratio, the less the face value of the HSI CBBC. Therefore, investors need to note that the low price of CBBC does not mean cheap, but the amount of purchase per hand is smaller. Whether CBBCs are cheap or expensive should be compared with the annual rate of financial charges. The higher the annual rate, the higher the fees charged by the issuer.

Finally, we need to pay attention to the change in leverage ratio. The leverage ratio of HSI CBBCs is the same as that of other types of CBBCs, which is in reverse with the rise and fall of CBBCs. When a Hang Seng Index goes up as the Hang Seng Index rises, its leverage ratio will be reduced. Investors should pay attention to their leverage ratio, examine the leverage ratio of CBBCs held and make strategic adjustments.