Advertising. The pandemic-induced slump on the stock market last spring has been followed by a surprisingly rapid recovery over the past few months. Monetary and fiscal policy in particular contributed to the general sigh of relief in the economy and on the capital markets. There is little doubt that the central banks, which are operating with massive injections of liquidity, are likely to keep their key interest rates low in the longer term. In addition, the planned EU reconstruction plan could give the European stock market a tailwind in the longer term.
On the other hand, the continuation of the general recovery is fraught with great uncertainties. These currently include the threatening effects of increasing corona infection numbers in many European countries. In addition, stock exchange turbulence is feared in the event of a chaotic US election, while the risk of a disorderly Brexit continues to cause nervousness.
In order to use the stock market to hunt for above-average interest rates despite its fluctuations, while classic interest rate investments hardly deliver any income or even negative returns, innovative investment solutions are in demand. For example, in the case of Express Certificates, buffers for falling index prices can be dimensioned particularly generously so that only moderate conditions for the potential interest payments and any early repayment need to be met.
55 percent buffer for the interest payments and for the final repayment
The DekaBank Express certificate memory with airbag 02/2027 based on the EURO STOXX 50® (WKN DK0YDR) sets the base price and the barrier at just 45.00 percent of the starting value (index closing price on November 13, 2020). As a result, the broadly diversified EURO STOXX 50® Index is granted a 55.00 percent buffer for any price losses. In order for the certificate to pay EUR 0.65 interest per period including the catch-up effect (memory function), the EURO STOXX 50® index must close at or above the 45.00 percent barrier on the observation days.
The barrier is also relevant if a decision is made in February 2027 whether the repayment will be made at the nominal amount of EUR 100.00. In addition, the airbag function offers a buffer with the 45.00 percent base price, because it puts the investor in a better position in the event that the barrier is ultimately exceeded than in the case of an investment for index participation from the start of the term.
Low 70 percent repayment threshold for the option of early repayment
However, a successful conclusion is possible much earlier because the express certificate also offers the option of early repayment. This is decided by the closing price of the EURO STOXX 50® on the annual observation days (for the first time after 14 months), with the repayment threshold being fixed at 70.00 percent of the starting value. Accordingly, there is a buffer of 30.00 percent for potentially falling index levels in order to trigger early repayment.
However, if none of the five annual observation days lead to early repayment and the EURO STOXX 50® even closes below the 45 percent barrier on the valuation date (February 19, 2027), there is a risk of losses. In such a negative scenario, the final interest payment including the memory function does not apply and the reduction in the repayment amount compared to the nominal amount corresponds to the percentage index loss based on the low base price, which is 45.00 percent of the starting value (airbag function). In addition, as with any certificate, the issuer risk must be taken into account because, particularly in the event of DekaBank’s insolvency, there is a risk of losses or even total loss.
The subscription runs from 10/26/2020 to 11/13/2020, subject to an extension or shortening.
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Disclaimer: The information contained herein does not constitute a recommendation to buy or sell the financial instrument and cannot replace individual advice. This advertising information does not contain all relevant information about this financial instrument. Before making an investment decision in certificates, potential investors are advised to read the securities prospectus in order to fully understand the potential risks and opportunities of the investment decision. The approval of the prospectus by the competent authority is not to be understood as an endorsement of the securities offered. The securities prospectus and any supplements can be found at https://www.deka.de/deka-gruppe/wertpapierprospekte under the tab “EPIHS-I-20”, the final terms at https://mmscache.deka.de/DE000DK0YDR0_FT.pdf downloaded. All securities information and the current key information sheet are also available from your Sparkasse or DekaBank Deutsche Girozentrale (www.deka.de), 60625 Frankfurt available free of charge. You are about to acquire a product that is not easy and can be difficult to understand.
If courses / prices are mentioned, these are non-binding and do not serve as an indication of tradable courses / prices. The values given here serve to explain the payout profile of this financial instrument. The values are not a reliable indicator of future performance.
Sales restrictions: Reference is made to special sales restrictions and sales regulations in the various legal systems. In particular, the financial instruments described herein may not be offered for sale or purchase within the United States of America or to or for the benefit of U.S. persons.
The EURO STOXX 50® Index and the trademarks used in the index name are the intellectual property of STOXX Limited, Zurich, Switzerland and / or its licensors. The debt security based on the index is in no way sponsored, issued, sold or advertised by STOXX and / or its licensors and neither STOXX nor its licensors have any liability in this regard.
Rating from September 25th, 2019, more information at www.deka.de/privatkunden/auslösungen/scope-zertifikate-management-rating
As Head of the Private Banking, Product Management and Product Sales unit of the Deka Group, Hussam Masri is responsible for product development and product management of mutual securities funds, asset management and pension products, certificates and private banking.