This year, as Tesla and Nvidia stocks have fallen more than 30-40%, securities linked to these two stocks as underlying assets are being continuously released. However, as Tesla and Nvidia stocks have sharply declined since last month, some ELS have entered loss zones, increasing the possibility of losses. There are also concerns that if the downturn in the U.S. stock market continues, a large-scale loss situation could occur across ELS products that follow the U.S. stock market.
According to the Korea Securities Depository on the 8th, from the beginning of this year (January 1 to April 7), 405 ELS linked to Tesla or Nvidia stocks have been issued. This is a 50% increase compared to 271 related ELS issued during the same period last year, and the total payment scale increased from 396.6 billion won to 660 billion won, a 66% increase (263.4 billion won). NH Investment & Securities launched the most with 81, followed by Kiwoom (77), Mirae Asset (77), Hanwha (47), and Hana (33).
ELS are derivative products that pay principal and interest if the price of the underlying asset does not fall below a predetermined price until maturity. The maturity is typically three years, and the underlying asset is evaluated every six months; if the early redemption criteria are met, the principal and interest are paid. If the price of the underlying asset falls below the designated price before maturity, there may be a loss of principal.
The price of Tesla stocks peaked at $479.86 on December 17 last year and halved to $239.43 on the 4th. It has fallen 41% this year, dropping more than 30% since the end of February. Nvidia also peaked at $149.43 on January 6 this year, falling 37% to $94.31.
Until mid-October of last year, Tesla's stock price was below $220, while Nvidia showed a sharp rise above $100 from September that year; thus, ELS issued prior experienced successful early or maturity redemptions. Therefore, securities firms also have the capacity to reissue, and the demand from ELS investors looking to profit from low prices has increased. This year, 185 related ELS have delivered annual returns of 10-20% and been redeemed at maturity or early.
However, some products of the Tesla and Nvidia investment ELS launched since the end of last year have entered loss zones. Hana Securities announced on the 7th that three ELS (15990, 16567, 16623) tracking Nvidia and Tesla have entered loss zones. Notably, in the case of ELS 15990, which has a maturity evaluation date of the 29th of this month, losses will occur if Nvidia's stock price does not exceed $105.93. Tesla's stock price must also be maintained above $194.64.
Kiwoom Securities announced that although the three ELS (1295th, 1296th, 1298th) of the New Global 100 trillion ELS launched in December last year are not in a loss zone, early redemption has been postponed in the first evaluation. All three have Tesla as a common underlying asset, along with AMD and Nvidia.
If the U.S. stock market falls further, the risk of losses for ELS containing other big tech stocks may increase. On this day, Mirae Asset Securities and Hanwha Investment & Securities announced that the ELS issued last year (35277) and Hanwha Smart ELS No. 9302 have entered loss zones and liquidity barriers, as the underlying asset AMD fell below the benchmark price. Im Ji-yong, a researcher at NH Investment & Securities, noted, "If the Trump tariff policy proceeds without change, downward adjustments to earnings estimates for big tech will be unavoidable," adding that "Apple, Amazon, Tesla, and Nvidia will be significantly affected."
However, there are opinions indicating that many ELS still have maturity remaining, so they need to be monitored. There are considerable products that set the loss zone around 20-40% below the benchmark price, so as long as the stock price of the underlying asset does not plummet, redemption can occur at maturity. For example, for the ELS No. 35959 launched last month, the barrier for the underlying asset Tesla is set at 25%, allowing redemption if it does not fall below $176 until maturity in 2028.