The following risk factors should be considered prior to making any investment:
- Coupon Income Risk:
- If the reference or underlying assets do not satisfy the predetermined conditions during the life of the investment, the return can be lower, or even zero, as compared with the return on traditional deposits or fixed rate securities of comparable maturity and credit quality.
- Therefore these instruments may not be able to pay periodic interest.
- Hence, they may not be suitable for investors who require regular income payments.
- Credit Risk:
- While most structures provide protection on principal, or a minimum return of initial investment upon maturity or if called, any such guarantee rests on the credit quality of the issuer.
- Most issuers are evaluated for credit quality by local and international rating agencies.
- Credit ratings reflect the independent opinions of the credit rating agencies and are not a guarantee of credit quality.
- In the case of default, an investor may lose all or part of the principal as well as any accrued interest.
- Liquidity Risk:
- While secondary market for these instruments is generally available, Maybank does not guarantee such a wholesale market will exist.
- Nevertheless Maybank will always provide liquidity for its structures for investors who may want to terminate them prior to maturity.
- However, these instruments should always be considered as a buy-and-hold investment.
- If sold prior to maturity, market conditions or changes in the credit quality of the issuer may cause the resale price to be lower than the purchase price.
- Call Risk:
- Most structures may be called by issuer (but not the investor except in certain cases) prior to maturity and thereby exposing investors to reinvestment risk.
- That is, if issuers decide to call in the structures, investors risk losing higher interest deposit or investment.
- Exchange Rate Risk:
- The value of investments denominated in currencies other than Ringgit will be affected by fluctuations in the currency markets.