China's rich flocking to leveraged bets on notes with yields of up to 15%

Hong Kong

CHINA'S wealthy are flocking to investment products that buy bank capital securities and soup up returns by using borrowed funds.

Elm BV, a special purpose vehicle used by UBS Group AG, has sold 3.7 billion yuan (US$754 million) of structured notes in 18 offerings since 2015 with yields as high as 15 per cent, data compiled by Bloomberg show. Goldman Sachs Group Inc, Societe Generale SA and Guotai Junan Securities Hong Kong Ltd have also designed such products, which often use leverage to invest in US currency capital securities. Chinese banks sold at least US$27.7 billion of Basel III notes offshore since the first issuance in 2014.