Jiang Shuying's snowball structured product with fire can only be invested with 10 million in the future
不割穷人
Author | Small debt
Source | Bond Market Watch
Recently, the "snowball" product has been frequently searched, first it was rumored that an investor "Mr. Tang" invested 2 million in the snowball product and was told that there was no principal and coupon, and then the well-known artist Jiang Shuying invested in the snowball and rushed to the hot search, such a combination of punches will push a high-risk and high-yield financial derivative financial product in the spotlight.
Here's the thing, at noon on January 22, the rumor that "actress Jiang Shuying went to Shenwan Hongyuan's headquarters due to a snowball explosion" quickly fermented on social platforms, with the two major traffic labels of female star and snowball liquidation, and related screenshots and photos were quickly spread for a while.
However, according to the Financial Associated Press, the screenshot of Jiang Shuying's online transmission is untrue news. Jiang Shuying did invest in snowball products in Shenwan Hongyuan Group Co., Ltd. (hereinafter referred to as "Shenwan Hongyuan") before, but the news that she went to the headquarters of Wanhongyuan Group because of the "explosion" on the Internet is fake news, and the relevant pictures of the so-called scene are also taken at a shooting site, not taken at Shenwan Hongyuan.
Source: Finance Associated Press Video Account
However, the discussion about the snowball liquidation continues unabated.
Previously, a calm investor "Mr. Tang" only replied with a "um" to the screenshot of the 2 million snowball product principal and coupon he invested in on the social platform. The screenshot shows that "Mr. Tang" was told that the 24-month CSI 500 Index Snowball will expire on January 15, 2024, because the contract margin rate is 25%, and the ending price of the CSI 500 Index is 26.83% lower than the opening price, and the 2 million principal and coupon of his investment this time are completely gone.
Calmly "Mr. Tang" replied at a loss "um" Source: Internet
The soaring popularity of snowball products has also caused everyone to speculate whether the "snowball" product is related to the stock fund platform snowball. But in fact, this "snowball" is not the other "snowball".
On the afternoon of January 22, Xueqiu Platform issued a special clarification, refuting the rumor that the "Xueqiu Structure" product has nothing to do with Xueqiu Platform, and pointed out that the confusion and misleading caused by some institutions naming the "Xueqiu Structure" on the issuance of automatic redemption option products not only infringed on the trademark rights and interests of Xueqiu Company, but also harmed the interests of Xueqiu users.
In addition, according to the latest news from 21 Finance on the evening of January 24, at present, individual investors mostly participate in Xueqiu products indirectly by subscribing to private equity fund products, and the subscription threshold is 1 million yuan. In the future, after the official release of the Measures for the Supervision and Administration of Private Investment Funds, the threshold for individual investors to participate in Xueqiu may be raised to RMB 10 million.
01
What exactly is a "snowball" product?
And what is the "snowball" product that is popular on the Internet?
According to public information, the "Snowball" product has been developed for nearly 20 years and was born overseas, and BNP Paribas first launched the "Snowball" product in 2003. Then, from 2019, it emerged in China and began to gradually enter major wealth companies and third-party platforms. The seller of the product is generally a brokerage firm, or a futures risk management subsidiary or other institution, and the buyer is basically a professional investor, including bank wealth management, private equity funds and other products and institutional investors.
The "Snowball" product, also known as the Snowball structured product, is an innovative financial over-the-counter derivative (not traded on an exchange) with a certain leverage mechanism. The reason why it is called a "snowball" is because the income of this wealth management product can be like a snowball, as long as the market does not fall like an avalanche, the longer it is held, the higher the profit may be. But corresponding to the high yield, it is also a high-risk investment and wealth management product.
At present, most of the snowball products in the market are linked to the CSI 500 and CSI 1000 indexes, and the contract duration is mainly 1 year and 2 years, and most of the knock-in lines are 70%-80%.
Snowball products are set with pegged targets (i.e., tracking targets) and knock-in knock-out conditions, and their final profit and loss depends on the performance of the pegged target and whether the knock-in knock-out event occurs.
When an investor buys a snowball product, they essentially sell an over-the-counter put option with knock-in and knock-out terms.
If the price of the underlying asset rises to a certain level (knockout price), the snowball product is terminated early, and the investor receives a fixed income for the duration of the product. If the price of the underlying asset falls to a certain extent (knock-in price), the profit or loss is determined based on the price of the underlying asset on the expiration date. Among them, the knock-in and knock-out prices are subject to the closing point of the day.
If the knock-in knock-out event is not triggered, the longer the holding time, the greater the coupon return, but if there is an extreme market, you need to bear the same loss as the underlying decline.
Summary of the revenue of Xueqiu products
According to Red Star News, there is only one scenario that will trigger investors to lose money, that is, "a knock-in event occurs, no knock-out event occurs, and the expiration price < the opening price".
In other words, even if the knock-in is triggered, as long as the expiration price is higher than the opening price, the investor can still protect the safety of the principal.
In addition, if the knock-in phenomenon occurs first, but the knock-out is triggered before the maturity date, then the investor can also make a profit, and calculate the corresponding investment return according to the knock-out time.
Source: Canned Gallery
And will the situation that "Mr. Tang" invested in Xueqiu products with no principal on the Internet?
Take the CSI 500 Index, the underlying of the snowball product purchased by "Mr. Tang", as an example.
According to the screenshot of the online transmission, the opening index of the CSI 500 of this product is 7097.76 points, and the knock-in condition is 75% of the initial price, and the knock-out condition is unknown. When the CSI 500 index closes at 5323.32 points, a knock-in event is triggered. If calculated at 103% of the opening price of the knock-out condition of a general product, the knock-out event will be triggered when the CSI 500 Index closes at 7310.69 points.
However, during the 2-year contract duration, the product did not trigger a knock-out event until it expired on January 15, 2024, and the CSI 500 Index closed at 5193.30 points, triggering the knock-in condition. The whole process is in line with the scenario of "a knock-in event occurs, no knock-out event occurs, and the expiration price < the opening price".
It stands to reason that "Mr. Tang" only needs to bear the investment losses, but why does he have no principal at all? The reason is that he used leverage in his investment. Judging from the screenshot information, "Mr. Tang" should have increased leverage by 4 times, and the position was closed directly after a decline of 25%, and the whole army was wiped out.
02
"Snowball" or "Avalanche"?
In recent years, the non-principal-protected income certificate of Xueqiu has attracted more and more attention in the market, and with the overall decline in interest rates, the impact of Xueqiu products with a yield of more than 10% in the market has gradually increased.
At present, the size of the domestic stock snowball is about 200 billion yuan to 300 billion yuan. Because the knock-in price of Xueqiu products is generally set at a relatively low level, it is difficult to knock in according to common sense, and even if you knock in, you can wait patiently, so many investors will ignore the risks of Xueqiu and treat it as a fixed-income product.
But high yield means high risk, and there are potential risks hidden behind its high coupon.
Since 2022, the A-share market has shown great volatility. As of January 18, 2024, the CSI 500 Index is down 31.15% from the end of 2021, and the CSI 1000 Index is down 32.92% from the end of 2021.
The index has accelerated to the bottom, and the knock-in risk of snowball products has also been concerned by the market.
Source: Canned Gallery
With the continuous fluctuation of the A-share market, coupled with the recent news of the explosion of the real investor "Mr. Tang" and the well-known actress Jiang Shuying, the topic of "snowball structure products concentrated knock-in" continues to ferment, and there are even rumors that "the adjustment of the brokerage hedging order when the snowball is concentrated is an important reason for accelerating the rapid decline of the index", which further aroused the concerns of many investors about the market.
Liu Fuchen, head of research at Lingling Technology, said in an interview with Brokerage China that brokerages will increase their hedged positions to a larger proportion than the snowball, such as 120%, before the snowball structure product is knocked in. If a knock-in event occurs, the brokerage can roughly estimate the amount that needs to be sold through the knock-in scale, and the market is worried about the impact caused by the transmission of this part of the brokerage's selling positions to the stock spot market.
So will a large number of brokerage positions reduction or selling operations have an impact on the spot market, resulting in a sharp drop in spot, and then a chain reaction of "selling more and more, selling more and falling"?
According to the Financial Associated Press, when knock-in occurs, if the brokerage adopts a smooth adjustment strategy to reduce risk exposure and avoid violent fluctuations in the market, the impact on the market will be limited. In addition, the cash market may be relatively independent of the volatility of the stock index futures market.
Therefore, the chain of transmission from the futures market to the spot market is not smooth, and the impact of snowball products on the stock spot market is relatively limited. The impact is mainly focused on the spread movement of stock index futures.
The industry generally believes that at present, the risk brought by snowball knock-in has been released to a certain extent, and the knock-in points of subsequent products that have not yet been knocked in are relatively dispersed, and the risk is relatively controllable.
In Liu Fuchen's view, the reason why snowball structure products are more popular in recent years is mainly because it can obtain relatively high coupon income in a relatively volatile market, so it is more suitable to invest in snowball structure products when the coupon is relatively high and the market point is relatively low. In fact, the coupon is mainly related to the fluctuation of the market and the discount of stock index futures, if the market volatility is greater and the discount of stock index futures is higher, the coupon will be higher in this case, and the more cost-effective it will be to invest in snowball. ”
However, the snowball product is essentially a "mild bullish and bearish and not down" product, with tail risk, and a knock-in loss may offset the previous knock-out gains many times. If the market is already at a high level, the risk of falling is very high, and the fall below may not be small, and it is not suitable to allocate snowball products when choosing investment.
A lawyer Lu who invested in Xueqiu products more than ten years ago recalled his investment experience to Bond Market Watch, saying that he bought Xueqiu products from a foreign bank in Suzhou at that time, invested 1 million yuan for one year, and the yield involved several interest settlement standards, and finally earned 150,000 yuan.
When it comes to investment risks, he said that the main reason is that the profession is not equal. "Professionals like me don't have time to digest so many contract terms, and the salesperson's explanation hides a lot of problems, and finally because the stock market is profitable, similar products may be more suitable for the so-called balanced market, just like the market around 3,000 points in the previous paragraph. ”
Source: Lawyer Lu posted his investment feelings on a social platform
Having said that, products like Xueqiu are more suitable for people with high-risk preferences, and the "Mr. Tang" mentioned above can lose 2 million at a time so calmly, which probably shows that he can bear the risk of losing all his money in this investment. However, for ordinary investors, if they lack investment experience and have a weak risk tolerance, they should avoid choosing high-risk, high-yield financial products such as Xueqiu.
Even if you have a risk tolerance, you must fully evaluate and consider before investing in Xueqiu structured products, after all, once you knock in a loss, you may have no principal, and the funds accumulated over the years will be wasted.
Do you have anyone around you who buys Xueqiu products? What is the investment income? What impact do you think the popularity of this Xueqiu liquidation will bring to the market? Welcome to leave a message in the comment area to discuss.