HSBC has recently launched another Equity Linked Deposit Account (ELDA) for depositors looking for security of capital. Interest is paid out subject to increase in value of all the equities to which the account is linked.

The account is offered in either EUR or GBP denominations and a minimum deposit of e2,500 and £2,500 respectively applies. Both options are linked to a pharmaceutical multinational stock basket made up of shares in Astrazeneca, Johnson & Johnson, Medtronic, Novartis, Pfizer and Wyeth. The term to maturity of ELDA will depend on the performance of the mentioned shares and may vary from a term of one to five years.

On the first anniversary date from strike date (16 February 2009), if all shares linked to the deposit increase in value, interest on the deposit is calculated at the rate of 9% and paid out to the account holder together with the original amount deposited. If, however, the linked shares do not all register an increase in value, no interest is paid and the capital deposited is renewed for a further year. This principle is applied on subsequent anniversaries up to the fifth year and interest will be worked at 18% for the second year, or 27% after the third year, or 36% after the fourth year or 45% after the fifth and final year. The annualised rate of interest rate is equivalent to 9% p.a. If by the end of the fifth and final year, the share prices do not all register an increase in value when compared with the share price on strike date, then the account is closed and the original amount deposited is paid without any interest to the depositor.

The closing date for this limited issue is on 9 February, but HSBC may withdraw the offer at any time prior to the closing date in case of over-subscription.

The value of the deposit (and returns) will be paid back in full.

However, if the base currency is different from the currency of ELDA,

the value of the deposit is subject to currency exchange rate fluctuations

which may go down as well as up over the term of ELDA.