The Standard:Deal tones down minibond anger

23 July 2009

The tone of the beleaguered holders of Lehman minibonds has now softened, but many said yesterday they still find the compensation deal unacceptable.

A 74-year-old minibond investor surnamed Yiu said he wants the government to make the banks repay him 100 percent.

``I was about to renew my time deposit on November 2, 2007, when CITIC Ka Wah Bank cheated me to switch to equity-linked products,'' Yiu said.

Peter Chan Kwong-yue, chairman of the Alliance of Lehman Brothers Victims, said the compensation agreement was ``not acceptable at all.''

``This is not making sense,'' Chan said. ``The guy who drafted up this agreement _ either he is doing some very tricky thing, or he does not understand Hong Kong people at all.''

One hundred members of the Alliance protested all day yesterday outside the office of the Securities and Futures Commission.

Alliance member Ng Shing-fung said he thinks the banks will still be able to make a profit after compensating minibond investors, so he will refuse to accept the proposal. ``They are simply cheating us once more,'' said Ng, 63.

Raymond So Wai-man, an associate professor of finance at Chinese University of Hong Kong, urged individual investors to take the compensation, as the value of minibond collateral could fall further. ``The monetary value of your minibond has effectively been locked up,'' So said. ``Not getting back the money, you cannot invest even when there is a better investment opportunity.''

Independent lawmaker Priscilla Leung Mei-fun said minibond holders should seriously consider the proposal because they will have to resort to lawsuits to get full compensation. Sixty percent compensation is a fair baseline, Leung said.

Chan said the problem is the settlement agreement does not apply to so- called ``experienced investors,'' defined as people who had invested in leveraged or structured products five times in the three years before buying minibonds.

Even conservative investors in Hong Kong may have been convinced by banks to put their money into a foreign exchange-linked deposit, he said.

``I tell you, Martin Wheatley has no sense about the Hong Kong people,'' Chan said. ``First he says `minibonds' does not mean `bonds,' then he comes up with this agreement.''

However, Chan admitted the basic framework of the agreement seems ``reasonable at first glance. But when you think more about it, it gives you the sense investors are being trapped.''

Chan estimated about half the members of his group may qualify as ``experienced investors'' and would not be eligible for compensation. He said the Alliance will meet Sunday to decide whether to pursue further action.

Minibond investor Wong Kin-ming, 54, said he thinks the government is treating the public unfairly. ``Government policies are two-sided,'' Wong added. ``Sun Hung Kai just paid us all back.''