The investment return rate for equity-linked securities (ELS) in the third quarter of this year was recorded at 0.8%. This marks an improvement of about 7.2 percentage points compared to the 6.4% investment loss rate in the second quarter, which saw concentrated losses based on the Hong Kong H Index.
The Financial Supervisory Service (FSS) announced on the 30th the status of issuance and management of derivatives-linked securities by securities companies in the third quarter of 2024. The annualized return rate for derivatives-linked securities (DLS) in the third quarter of this year was 2%, up 0.9 percentage points from 1.1% in the second quarter.
It seems to have escaped the shock of the decline of the Hong Kong H Index. As of the end of September this year, the amount of derivatives-linked securities that experienced knock-ins, where principal loss could occur, totaled 300 billion won, all of which were ELS products. This is a decrease of about 95% from the 6.6 trillion won at the end of last year. The FSS explained that most ELS based on the Hong Kong H Index were repaid early or at maturity.
The issuance amount of derivatives-linked securities in the third quarter of this year totaled 14.2 trillion won, down about 300 billion won from the second quarter. During the same period, the repayment amount was 15.4 trillion won, a decrease of 6.4 trillion won. As repayments exceeded issuance amounts, the balance of derivatives-linked securities decreased from 80.5 trillion won at the end of June to 78.3 trillion won at the end of September.
In the third quarter of this year, 9.4 trillion won worth of ELS were issued. The principal repayment type accounted for 5.2 trillion won (55.5%), while the non-principal guaranteed type accounted for 4.2 trillion won (44.5%).
By type of underlying asset, index-type ELS accounted for 5.7 trillion won (60.4%), making it the largest share. This was followed by stock-type ELS at 3.5 trillion won (37%) and mixed-type ELS at 300 billion won (2.7%).
Among the index-type ELS issued in the third quarter of this year, the Korea Composite Stock Price Index 200 amounted to 4.6 trillion won, the largest. The U.S. Standard & Poor's 500 Index totaled 3.3 trillion won, the Euro Stoxx 50 index reached 3 trillion won, and the Japanese Nikkei 225 index amounted to 1.2 trillion won. ELS based on the Hong Kong H Index stood at only 300 billion won.
In the third quarter of this year, the principal repayment type of DLS was issued at 3.8 trillion won, while the non-principal guaranteed type amounted to 1 trillion won. The underlying assets for DLS included interest rates at 3.5 trillion won, credit at 600 billion won, and exchange rates at 500 billion won.
The FSS decided to strengthen checks on the loss potential for derivatives-linked securities investors. Although the U.S. stock market is thriving, with the S&P 500 Index reaching all-time highs, the KOSPI 200 Index has continued to decline in the second half of this year.