Last October, Wang Wu, a 58-year-old Hong Kong housewife, had a stroke. A few weeks earlier, US investment bank Lehman Brothers had collapsed, taking US$90,000 of the Wang family's life savings down with it. The irony was that the Wangs never invested in Lehman Brothers, not even in the bank's now-infamous minibonds.
Instead, in 2006 they bought Octave Notes, fiendishly complex structured products designed by another US investment bank, Morgan Stanley, and marketed as a high-income product to retail investors by 17 local banks.
Mr Wang claims he and his wife had no idea the future of the couple's retirement income had anything to do with Lehman Brothers. But lurking under the bonnet of the Octave Note the Wangs bought from Citic Ka Wah Bank was a complicated credit derivative that effectively ruled that if Lehman Brothers went bust, investors' money would disappear. Mr Wang says he found out in late September that all the money was gone.
'I cannot say [the stroke] was totally due to this incident,' he said of his wife's condition, which has left her unable to speak. 'But she was worrying about the money [she lost] all the time.'
A Citic Ka Wah spokesman said the bank could not comment on individual cases.
Mr Wang is one of 400 outraged retail investors who have lodged grievances with the Hong Kong Monetary Authority about Octave Notes. Investors poured more than HK$2 billion into the products. Most have lost almost all their investment.
Advertisements for the note the Wangs bought promised annual interest of up to 7.5 per cent. According to Mr Wang, what they did not see within the highly structured investment was a bundle of derivatives with the potential to turn into a ticking time bomb.