How does RMB NDF Contract work?

To enter into a RMB NDF Contract, you have to choose either the "Buy" or "Sell" option for RMB. On the settlement date, the Bank will calculate the settlement amount in USD proportional to the difference between the agreed forward exchange rate and the subsequent spot fixing rate as announced by the People's Bank of China on valuation date. The whole process does not involve the delivery of RMB.

With RMB NDF Contracts, you can:

• Lock the desired exchange rate - If you are holding RMB deposits, you can receive stable return by fixing the desired exchange rate with a RMB NDF Contract.
• Hedge against exchange rate risk - In the event that you need RMB in the future, a RMB NDF Contract can be served as an alternative hedging tool to minimize your exchange rate risk.
• Enjoy greater financial flexibility - Your cross-border business may require RMB for settlement. In this case, a RMB NDF Contract can effectively assist you in managing the risk of currency fluctuations.

Highlights of Chinese Yuan Non-Deliverable Forward Contracts:

Contract currency	USD against RMB
Contract period	1 month, 2 months, 3 months, 6 months and 12 months
Minimum contract notional amount	USD10,000
Contract underlying amount	Designated underlying amount prescribed by the Bank will be required. Customers can choose to use different types of deposit as the underlying, including fixed deposit, foreign currency savings, Hong Kong dollar savings, current deposits or RMB savings.
Number of contract	No limit
Settlement rate	The official closing rate of exchange for RMB against the USD as announced by the People's Bank of China on valuation date.
Settlement currency#	USD (Without delivery of RMB)
Calculation of settlement currency amount	Contract notional amount × [1 -(forward rate / settlement rate)] If settlement amount> 0 The seller of USD shall pay the settlement amount to the buyer of USD. If settlement amount< 0 The buyer of USD shall pay the settlement amount to the seller of USD.
Service charge	Free
Trading hours	Monday to Friday: 9am to 5pm excluding Saturday, Sunday and Hong Kong public holidays
Transaction channel	All branches of Nanyang

# Foreign currency savings account shall be used for settlement purpose. If customers do not have foreign currency savings account, his/her HKD savings account, current account or RMB saving account will be considered as settlement account after currency conversion into HKD.

Example 1
If you want to sell USD and buy RMB

• You are planning to invest in RMB with your fixed deposit of USD20,000 which will mature 3 months later. You want to lock up the investment value at the existing RMB forward exchange rate. You can use the USD fixed deposit as the underlying to enter into a 3-month RMB NDF Contract with the Bank by selling USD20,000 at contract exchange rate of 8.0300 (RMB per USD). In this case, the RMB NDF Contract can assist you to hedge against any possible RMB appreciation.
• On the valuation date, the settlement details are as below:

  	Settlement rate (RMB per USD)	Settlement amount (USD)	Remarks
  Scenario 1	8.1000	+172.84 (Amount paid to the Bank by you on settlement date)	Settlement amount > 0 As your RMB NDF Contract is to sell USD and the settlement rate of RMB against USD is higher than the forward contract rate, there is a loss in your RMB NDF Contract. However, you can buy RMB at a lower spot rate.
  Scenario 2	8.0300	0	There is no loss or gain. You will buy RMB at spot rate.
  Scenario 3	7.8500	-458.60 (Amount paid to you by the Bank on settlement date)	Settlement amount < 0 As your RMB NDF Contract is to sell USD and the settlement rate of RMB against USD is lower than the forward contract rate, there is a gain in your RMB NDF Contract. However, you will buy RMB at a higher spot rate.

Example 2
If you want to buy USD and sell RMB in future

• You have entered a contract with a business partner in China and you are expected to receive a payment of RMB500,000 six months later. Since the cost of goods will be settled in USD, you would like to hedge the exchange rate risk of RMB against USD. Under this situation, you may opt to enter into a 6-month RMB NDF Contract with the Bank by selling RMB500,000 and buying USD62,774.64 at the exchange rate of 7.9650. In this case, the RMB NDF Contract can assist you to hedge against any possible risk of RMB depreciation.
• On the valuation date, the settlement details are as below:

  	Settlement rate (RMB per USD)	Settlement amount (USD)	Remarks
  Scenario 1	8.1000	+1,046.24 (Amount paid to you by the Bank on settlement date)	Settlement amount> 0 As your RMB NDF Contract is to buy USD and the settlement rate of RMB against USD is higher than the forward contract rate, there is a gain in your RMB NDF Contract. However, you will sell RMB at a lower spot rate.
  Scenario 2	7.965	0	There is no loss or gain. You will sell RMB at spot rate.
  Scenario 3	7.8500	-919.63 (Amount paid to the Bank by you on settlement date)	Settlement amount < 0 As your RMB NDF Contract is to buy USD and the settlement rate of RMB against USD is lower than the forward contract rate, there is a loss in your RMB NDF Contract. However, you can sell RMB at a higher spot rate.

1. This product is a non-deliverable forward transaction in Chinese Yuan and the settlement currency is US dollars (or such other currency or currencies as may be specified in the confirmation signed by the customer).
2. Prior to investing in this product, customers should read the Chinese Yuan Non-Deliverable Forward Terms and the product specific information contained in the confirmation that will be provided to you when you enter into a non-deliverable forward transaction in Chinese Yuan, together with our Conditions for Services. The Chinese Yuan Non-Deliverable Forward Terms and our Conditions for Services are available upon request at any branch of the Nanyang Commercial Bank.
3. This product is not principal protected. Customers bear a foreign exchange risk should the exchange rate between the Chinese Yuan and the US dollar (or other specified currencies) change between the time the transaction is entered into and the time it is settled.
4. Customers should note that these are illiquid instruments which are not transferable or tradable. Customers should therefore be prepared to hold this investment until the settlement date.
5. Customers assume the full credit risk of the Bank.
6. Customers must make their own independent decision as to whether and on what terms to enter into a transaction and should take professional advice as appropriate.
7. Customers acknowledge that the Bank or an affiliate may be requested from time to time to provide quotation(s) for the purpose of determining the settlement rate to be applied in a transaction. Such quotation(s) may affect, materially or otherwise, the settlement of that Transaction.