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Thursday, 22 February 2001
South African first for Standard Corporate and Merchant Bank
Standard Corporate and Merchant Bank (SCMB) has launched an innovative product aimed at investors looking for an alternative to investing directly in the South African share market, and who wish to earn better than money market rates of interest.
The product, known as Yield Enhanced Security (YES), is popular worldwide, but is a first for South Africa. It will appeal to a wide range of investors.
Says Michael Gallagher, senior manager, SCMB Equity Derivatives: "YES gives investors the chance to earn very attractive rates of interest, especially during times of consolidation in the share market."
For investors who believe the market is unlikely to move significantly in either direction in the short term, YES provides an investment that may outperform cash and direct shares. "YES would certainly have outperformed the share market last year as it rose only 1.25%," says Gallagher.
The product offers fixed interest of potentially up to 30% a year and investors have the choice of investing in about 15 different leading South African companies. These include Anglo American, Billiton, Dimension Data, Old Mutual, Richemont and Sasol.
The minimum investment is R50 000 for about three months.
The purchase price of the security is 90% of the market price of the shares on the issue date. If, when the investment matures, the share price is above the purchase price of the YES, the investor will receive their principal amount back, plus interest. The principal amount can be reinvested for another three months.
If the shares are trading below the purchase price of the YES, the investor will receive either a reduced maturity payment or the equivalent value in shares. However, Gallagher stresses, "in either case the investor will receive the guaranteed rate of interest."
"While offering lower risk than a direct investment in the underlying shares, the performance of the YES depends on movements in those shares," says Gallagher.
For further information phone 0860 121 161.
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