In the first quarter of this year, the domestic derivatives-linked securities balance was reported to have increased compared to the same period last year. The demand for equity-linked securities (ELS) investments has partially recovered, and the concentration of maturities for ELS products based on the Hong Kong H index last year has influenced the reduction in this year's redemption amounts.
The Financial Supervisory Service reported on the 3rd that the balance of derivatives-linked securities was 84.6 trillion won as of the end of March.
Derivatives-linked securities refer to securities whose yields are determined by price fluctuations of underlying assets such as stock prices, interest rates, exchange rates, crude oil, and grains. Products based on stock prices or indexes are generally equity-linked securities (ELS) and equity-linked derivative bonds (ELB), while those based on bonds, commodities, or exchange rates are called derivatives-linked securities (DLS) and derivatives-linked bonds (DLB). The data announced by the FSS this time collectively referred to ELS, ELB, DLS, and DLB as derivatives-linked securities.
In the first quarter, the issuance of derivatives-linked securities amounted to 15.8 trillion won, an increase of 2.8 trillion won compared to the same period last year, while the redemption amount decreased by 6.2 trillion won to 11.5 trillion won, surpassing the issuance amount.
The issuance of ELS was 10 trillion won, an increase of 2 trillion won (24.1%) compared to the same period last year. Although the demand for related ELS products significantly decreased last year due to the plummeting Hong Kong H index, recent interest in overseas investments has increased, and the shift to a declining interest rate environment has led to a partial recovery in investment demand.
The redemption amount for ELS decreased to 7.4 trillion won from 14.4 trillion won, indicating that this year's redemption amounts have significantly dropped due to the concentration of maturities for ELS products based on the H index last year.
As a result, the proportion of principal repayment products stands at 51.7%, slightly increasing from the same period last year (49.5%). However, the proportion of public offerings decreased slightly from 86.3% to 83.7% during this period.
By underlying asset, the KOSPI 200 index accounted for the largest share at 4.1 trillion won, followed by the Standard & Poor's (S&P) 500 index at 3.7 trillion won. Products based on the KOSPI 200 index are showing a continuous upward trend due to the ripple effects of the Hong Kong H index incident.
A total of 5.9 trillion won in DLS was issued last year, an increase of 900 billion won compared to the same period last year. Among this, the issuance amount of principal repayment products was 5 trillion won, which increased by 900 billion won compared to the same period last year, raising its proportion by 2.1%.
The redemption amount for DLS also increased to 4.1 trillion won. The outstanding balance of DLS stood at 31.5 trillion won, an increase of 1.6 trillion won compared to the end of last year.
In the first quarter, the profits and yields for investors in derivatives-linked securities saw an increase for both ELS and DLS. In particular, the ELS turned from losses to profits as products based on the H index were mostly redeemed last year.
The FSS noted that, "Due to the recent expansion in global stock market volatility, there are concerns about investment losses in ELS products, so we will strengthen monitoring of issuance trends," adding, "Although the issuance of derivatives-linked bonds that guarantee principal repayment has been continuously increasing since the Hong Kong H index incident, we will inform about related risks as the principal may not be protected."