The rich of China returns to the derivatives of "Snow Ball" in search of higher returns

The rich in China return to pumping their money into financial derivatives, known as ‘snowball’ in the pursuit of more generous returns, just one year after the regulators imposed restrictions on these products, which were partly responsible for the exacerbation of the stock market collapse. Investors with great wealth have pumped dozens of billions of Yuan in modified copies of these derivatives since the beginning of this year, in light of the remaining interest rates. People who are familiar with the case – who asked not to reveal their identity that the information is particularly – said that the “China Merchants Bank” bank alone has spread more than 30 billion Yuan ($ 4.2 billion) of these products issued by brokerage companies. High yields and although the latest versions of these derivatives are described as less risky, most of them still prepare annual returns of about 20%, according to the company “China International Capital”. Bloomberg’s market data indicates that some of these products achieved annual yields of 71% in rare cases. The revival of what is currently known as “Snow Ball similar” comes about a year after the regulatory agencies tightened the control of these products in an effort to combat the impulse of individual investors, after brokerage firms promoted record returns despite the sharp fall in stock prices. This return reflects the lack of available alternatives that offer high returns in the Chinese market, at a time when authorities are trying to increase growth by lowering interest rates. Read more: China’s service sector activity is the fastest growth in a year. The Chinese Security Regulation Committee did not respond to a request to comment on the subject, and the Chena Mercanz Bank refused to comment. How do “snowball” derivative instruments work? The “Snow Ball” contracts give investors coupons similar to mortgage returns, as long as the reference index remains within a predetermined range (usually between 75% and 105% of the level of the start of the contract). If the indicator breaks the minimum, the so-called check is a possible loss of the investor, which is equivalent to the decrease rate. As the market rises to the level of the contract (knockout), the investor gets the coupon for retaining the contract, and the contract is automatically terminated. CONTRACT CONTRACTS The new “Snow Ball” contracts are redesigned to extend the deadlines and reduce the number of monitoring days for the condition to activate the loss, in order to reduce the chances of losses. “The risk curve for the yield in the snowball tools is still attractive,” says Leo Votation, the founding partner of the Galaxy Technologies. He added that the high stock indicators have made the current conditions ‘very appropriate’ for these products in recent months. Also read: China defines financial instruments that can be used to defend its economy after years of falling stocks and real estate and poor returns in other investment instruments. The “Snow Ball” contracts with high yields have become a source of profit amid the scarcity of assets earned big profits, “according to the” Shanghai Santime Information Technology “consultation. And the regulatory authorities remain constantly vigilant, for fear of fluctuations in the market, after lasting the minimum investment in a ‘Snow’ Snow have, in an attempt to exclude investors with small investments, and an evil the existing size of this type of activities. Well considered. “Fear of loss, the expansion of the deadlines of law – which now reaches 3 years – and the absence of monitoring the condition to activate the loss during the possession of the contract, can increase the risks with the brokerage firms. Version that the letter can adopt. aggravate the possibilities of losses as the market conditions change. Liu added.