Structured Product Investor Survey

(From Dec 2006 onwards, this blog will be updated on Mon, Wed and Fri)

SFC has just published the Structured Product Investor Survey. As expected, it again revealed how HK investors are immature when investing in more complicated products.

A quick summary of key findings from this survey and my comments in ( ):

• The majority of investors are educated up to matriculation or tertiary level. (Unfortunately, the school education generally does not cover investor education.)
• Equity-linked products is still the main stream. Not many investors are interested in currency/index/interest rate/credit-linked products. (Many investors just treat equity-linked products as a substitute of stocks, just like they regard stocks and warrants as the same things.)
• Most of the investors' investment objective is pursuit of higher returns, where 42% compared the return rates with bank deposit rates. (This is of course not comparing "like with like".)
• Half of the investors said that structured products comprised over 30% of their investment portfolio. (They did not realize the risk of over-concentration, especaially when they think structured products are medium risk investments.)
• Half of the investors did not understand the payoff mechanism of equity-linked products. (Ignorance is the real risk of investing. To reduce mis-selling, the suitability process should assess the investors' financial knowledge.)
• Banks is the dominant dealing channel of structured products. (But bank staff are generally less professional in terms of selling structured products.)
• The majority of investors said that they did not fully understand the offering documents because they was too technical. (It is difficult to understand structured products without a financial knowledge.)
• More than 40% of investors did not recall the sales representatives' explanations. (How can you remember something you don't understand?)
• A quarter of investors redeemed their structured products before maturity. (HK retail investors have not yet acommodated the longer investment horizon of structured products.)
• The majority of investors made a net gain in their investment in structured products during the past 12 months. (Once there is a major downturn in the stock market, the investors would receive the "crab stocks" and make a lot of complaints again.)