Mediation for Hong Kong Lehman minibond investors underway
By Channel NewsAsia's Hong Kong Bureau Chief Roland Lim | Posted: 27 October 2008 2011 hrs

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HONG KONG: The Bank of China and DBS Bank in Hong Kong have begun contacting customers to discuss compensation for their Lehman minibond investments.

Meanwhile scores of disgruntled protesters continued their protests outside four Hong Kong banks on Monday.

It is estimated that more than 43,000 investors in the city bought over US$2.6 billion worth of products related to bankrupt Lehman Brothers.

All Hong Kong banks have agreed to buy back Lehman minibonds at market value.

Priority will be given to the elderly with no investment experience in structured products.

That will put 85-year-old retiree Mr Kwok, who invested his life savings in Lehman minibonds, among those likely to be at the front of the queue.

"HK$3.6 million. All my savings. They said it was safe, that I'd get interest every three months, enough for my daily expenditure. So I listened to them. Before that, I used to just put my money in fixed deposit," said Mr Kwok, crying.

The first round of re-purchases is expected to take place in early December.

Last week, DBS said it would make compensation of about US$53 million to its customers in Hong Kong and Singapore who had bought Lehman-linked structured notes.

That's after discovering that a number of cases did not meet the bank's standard when the products were sold.

Investors like Mr Wong have been contacted by the banks, but many have yet to receive an offer letter.

Mr Wong said: "They said it was linked with eight underlying assets, and if one was in trouble, there's still another seven. But now, information from the press and DBS says the remainder of the investment is almost zero. We, as victims feel the bank has tricked us."

But such losses aren't just limited to derivative products linked to Lehman's.

Aside from Lehman minibond investors, there are also angry protesters who bought equity structured-linked products.

They are also demanding compensation for their investments.

The Legislative Council has set up a sub-committee to look into the issue.

Albert Ho, a Democratic Party legislator, said: "We're trying to get to the bottom of the truth. This would help the victims get their compensation."

Lawmakers will examine how Hong Kong's central bank and securities watchdog regulate the sale of such financial products.

They will also look into how to restore confidence in Hong Kong's banking system.

- CNA/ir