HSBC is the first foreign bank to provide QDII products in mainland China

15 August 2006

The Hongkong and Shanghai Banking Corporation Limited today received approval from China's State Administration of Foreign Exchange for a quota of US$500 million for its QDII (Qualified Domestic Institutional Investor) services. The Bank has today rolled out two QDII products in nine Mainland cities, becoming the first foreign bank to provide QDII products in mainland China.

Richard Yorke, Chief Executive Officer China at The Hongkong and Shanghai Banking Corporation Limited, said: "We are very pleased to have received the quota for our QDII services and to now be able to offer products to mainland China investors. The QDII programme is an important step forward in China's financial market opening, offering mainland China residents an overseas investment channel and increased product options. With our international expertise and dedicated product development teams, we look forward to providing more high quality and diversified QDII products to mainland China customers in future."

HSBC's QDII offerings, under the Chinese name of Hui Ju Tong, comprise two Capital Protected Investment products, one linked to a basket of currencies and the other linked to Hong Kong SAR's Hang Seng Index. HSBC has jointly developed the products with its banking partner Bank of Communications.

Available at HSBC's outlets in nine cities including Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Qingdao, Dalian, Xiamen and Suzhou, the QDII products are offered in US dollars as foreign banks are not permitted to provide renminbi (RMB) banking to mainland Chinese citizens currently. The funds raised from selling the products will be invested overseas in two Structured Notes issued by HSBC Bank plc.

Catherine Fok, Head of Personal Financial Services for HSBC in China, said: "The QDII programme is new to the Mainland market and therefore at the initial stage, we are offering tailor-made, low risk Capital Protected Investment products to Mainland customers to meet their investment needs better."

The currency basket linked Structured Note requires a minimum investment of US$10,000 with an investment tenure of 18 months. It has a variable return linked to the appreciation of a basket of currencies comprising the euro, Korean won and Indian rupee, against the US dollar. Investors will receive 100% of their principal plus a potential variable return of up to 18% upon maturity. Should all currencies in the basket weaken or remain static against the US dollar or the appreciation of some currencies is more than negated by the depreciation of others at fixing, investors may receive a nil return but their principal is still protected.

The equity index linked Structured Note pays a return linked to the positive performance of the Hang Seng Index and has an investment tenure of two years. The product is designed with an auto-call feature, which is initiated when the underlying index level is equal to or greater than the trigger level on any of the valuation dates. When the auto-call is triggered, investors will receive both their principal and an exit return, which can be up to an annual rate of 8 per cent.

Media enquiries to Dan Dan Chang on [86] (21) 3888 1807

The Hongkong and Shanghai Banking Corporation Limited
The Hongkong and Shanghai Banking Corporation Limited is the founding and a principal member of the HSBC Group which, with around 9,500 offices in 76 countries and territories and assets of US$1,738 billion as at 30 June 2006, is one of the world's largest banking and financial services organisations.

HSBC in Mainland China
HSBC's network in mainland China currently comprises 24 outlets, including 12 branches (in Beijing, Chengdu, Chongqing, Dalian, Guangzhou, Qingdao, Shanghai, Shenzhen, Suzhou, Tianjin, Wuhan and Xiamen) and 12 sub-branches (in Beijing, Guangzhou, Shanghai, Shenzhen and Tianjin). Approval has been obtained to open a branch in Hangzhou and Xi'an this year. HSBC's China head office is based in Pudong, Shanghai.

Risk disclosure
The information in this document does not constitute any solicitation or invitation to treat for the making of any investment in any products referred to herein. The potential return under the investment plans depends on the market situation on the valuation/fixing dates during the investment period. Upon the occurrence of certain events, the issuer of the Structured Notes has the sole discretion to determine the level and/or price of the relevant Index (please also change the relevant Chinese version sentence to. The investment plans are not risk free and investors should be aware that only the payment clearly committed under contracts are protected. Investors should fully understand the investment risks and be prudent when investing. The investment plans cannot be regarded time deposit or its substitutes. Investors of these plans will bear the credit risks of HSBC, the custodian banks and the Structured Notes issuer. The plans allow early redemption by investors subject to the stipulation in the legal agreement, however, the principal is not 100 per cent protected under early redemptions. Investors should be fully aware that the investment may receive low or even no return. If the invested currency is not your base currency, and you need to convert back to your base currency at maturity, your return could be affected negatively or positively due to exchange fluctuations. Should you have any queries on this product, please obtain independent advice from your professional consultants.