What are CBBCs?

A CBBC is an instrument that tracks the performance of an underlying asset. The trading price of a CBBC tends to mirror the movement in the price of its underlying asset. Like warrants, CBBCs can be issued over a range of eligible underlying assets prescribed by the Exchange from time to time. However the scope of eligible underlying assets is currently more restrictive for CBBCs than it is for warrants. The list of eligible stocks for CBBCs is posted on the HKEX’s website:

https://www.hkex.com.hk/products/securities/callable-bull-bear-contracts/cbbc-eligible-underlying-assets/eligible-single-hong-kong-stocks-for-cbbc-issuance-in-current-quarter?sc_lang=en

A CBBC can be issued as a bull contract or a bear contract.

(a) A “bull” CBBC may be invested in by an investor who holds a view that the price of the underlying asset will increase during the term of the CBBC.

(b) A “bear” CBBC may be invested in by an investor who holds a view that the price of the underlying asset will decrease during the term of the CBBC.

Similar to a warrant, a CBBC may provide a leveraged return, but also carries the risk of magnifying your losses. Your maximum loss under a CBBC is limited to the investment amount you pay for the CBBC (plus any transaction costs, such as broker fees associated with your investment).