Market risk: Bond values are determined by the credit rating of the issuer, credit spread, and market interest rate, while bond income is determined by the fixed income or capital gains on rising bond prices. Based on the issuer’s credit rating, there may be differences in the security and volatility, and investment returns and risks can also vary because of market performance.
No maturity risk: If the investment target is perpetual securities with no maturity day, unless otherwise agreed, the issuer is not obligated to redeem such securities, and the Investor has no right to request the issuer to redeem such securities.
Issuer’s early redemption risk: If the issuer exercises the right to redeem bonds earlier, it will shorten the expected investment period.
Reinvestment risk: If the issuer exercises the right to redeem bonds earlier, the Investor will have reinvestment risks from reinvesting the investment principal along with accumulated interest in other appropriate products with similar return and maturity.
Investor’s early redemption risk: If a bond is not involved in any default, the issuer will redeem 100% return of the bond face value based on the product terms on the maturity date. If the Investor intends to redeem bonds earlier, the redemption must be processed at the actual deal price then on the secondary market, which may lead to a loss of principal. Therefore, if the Investor chooses to perform early redemption when the market price is falling, the Investor may suffer loss(es).
Interest rate risk: The marked-to-market value within the duration of bonds could depend on the interest rate changes of the issuing currency; when its interest rate rises, the marked-to-market value of the bond may decrease and incur losses to the original investment amount; when its interest rate falls, the marked-to-market value of the bond may rise accordingly and thereby bring extra gains.
Coupon risk: If force majeure events occur to the issuer of the bond, the issuer has the right to decide whether to allocate interest or not for the product continuously.
Liquidity risk: Bonds may not have sufficient market liquidity. Transaction completion cannot be guaranteed for instructions of excessively low amounts early redemption. When market liquidity or transaction volume is low, a significant spread may be generated between a bond’s actual transaction price and its asset value, which may result in losses of the original investment amount if the Investor redeems the bond before its maturity. Moreover, once the market completely loses its liquidity, the Investor will have to hold the bond until its maturity date.
Credit risk: The Investor shall assume the credit risk associated with the bond issuer or guarantor (if any). Credit risk refers to a situation when the bond issuer or guarantor (if any) fails to pay bond coupon, principal, or perform its other bond duty; whereas the evaluation of “credit risk” is dependent upon the Investor’s evaluation of the credit rating of the bond issuer or guarantor (if any). Credit ratings may change. The credit rating of any bond issuer and guarantor (if any) or the bond merely reflect independent opinions on the credit values of rated entities or bonds from relevant credit rating agencies rather than guarantee of credit qualities of the bond issuer and guarantor (if any) or the bond.
Currency exchange risk: A foreign bond is an investment product denominated in a foreign currency. If the Investor invests in the bond with currencies such as TWD or one that is not the product’s denominated currency, it is necessary to be aware of the risk of currency exchange upon returning accrued foreign currency interest and investment principal of assets converted back to TWD or a currency other than such foreign bond’s denominated currency may be lower in value than the invested principal.
Country risk: If force majeure events such as wars or natural disasters occur in the country in which the issuer or guarantor (if any) of the bond is registered, such situations may cause the Investor losses.
Event risk: A major unexpected incident involving the issuer or guarantor (if any) may lead to downgrades to the issuer’s credit rating.
Settlement risk: If emergencies, extraordinary situations, market volatility factors, or changes to settlement rules on holidays occur in the country in which the bond issuer or guarantor (if any) is registered, or in the location of the exchange of the linked investmen t products, or the delivery versus payment (DVP) settlement institution, settlement will be temporarily suspended or delayed.
Inflation risk: Inflation will lead to a decrease in the bond’s real income.
Taxation risk: The taxation laws applicable to the issuer and the Investor will affect the bond Investor’s income. The Investor shall assume bond-related taxes, including (but not limited to) stamp duty or other taxes generated from the bond or charges that may be collected. Generally speaking, the issuer will not pay additional amount to compensate any taxes, expected taxes, or withholding taxes or deducted amount deducted by the issuer or the payment agencies. If there are any changes in applicable taxation laws, the bond income may fall short of expectations. The Investor shall consult his/her own tax and accounting consultant before agreeing or deciding to purchase the bond.
