Thanks to strong domestic and overseas stock markets, most equity-linked securities (ELS) redeemed in the first quarter this year were paid back early. Buoyed by improving investor sentiment, issuance of derivatives-linked securities and notes also rose 24% from a year earlier.
According to the Financial Supervisory Service, issuance of derivatives-linked securities and notes in the first quarter this year totaled 19.6 trillion won, up 3.8 trillion won (24.1%) from a year earlier. Redemptions reached 20.6 trillion won, an increase of 7.9 trillion won (62.2%), while outstanding issuance at the end of the quarter was 93.5 trillion won, down 1.6 trillion won from the end of last year.
◇ Issuance of derivatives-linked securities up 17.5%… KOSPI 200 and Tesla "popular"
Issuance of derivatives-linked securities (ELS/DLS) was 6.7 trillion won, up 1 trillion won (17.5%) from a year earlier. Of that, ELS rose 14.6% to 5.5 trillion won, and DLS increased 33.3% to 1.2 trillion won.
By underlying asset, index-type ELS issuance accounted for the largest share at 3.8 trillion won. Many products were issued using KOSPI 200, S&P 500, Euro Stoxx 50 and Nikkei 225 as underlying assets, and on the back of gains in the domestic market, the KOSPI 200 share expanded to 78.7% this year from 70.1% last year. In contrast, the Hong Kong H-share index (HSCEI) remained around a 5% share due to the impact of large-loss events.
Issuance of single-stock ELS was 1.5 trillion won. Products using Tesla (800 billion won), Palantir (700 billion won), Samsung Electronics (400 billion won) and SK hynix (300 billion won) as underlying assets were popular on the back of high expected returns.
ELS redemptions totaled 7.1 trillion won, up 2.5 trillion won (54.3%) from a year earlier. Among them, aided by strong domestic and overseas stock markets, a large majority (96.4%) were redeemed early, reaching 5.5 trillion won, while DLS nearly doubled to 1.6 trillion won from a year earlier.
Outstanding derivatives-linked securities at the end of the first quarter were 17 trillion won, down 800 billion won from the end of last year. The annualized investment return was 8.3% for ELS and 4.5% for DLS, up 1.2 percentage points and 0.6 percentage points, respectively, from a year earlier.
The Financial Supervisory Service (FSS) said, "Derivatives-linked securities can incur principal losses, and the more underlying assets there are and the higher the returns, the riskier they are," and urged, "Invest only after fully understanding the product structure."
◇ Derivatives-linked notes issuance up 28%… demand grows for principal-protected ELB
Issuance of derivatives-linked notes (ELB/DLB) was 12.9 trillion won, up 2.8 trillion won (27.7%) from a year earlier. ELB issuance rose 43.1% to 7.3 trillion won, while DLB increased 12% to 5.6 trillion won.
By underlying asset, single-stock ELB was the largest at 5.1 trillion won, followed by index-type at 1.9 trillion won and hybrid at 300 billion won.
Redemptions were 13.5 trillion won, up 5.4 trillion won (66.7%) from a year earlier.
Outstanding issuance at the end of the first quarter was 76.5 trillion won, down 800 billion won from the end of last year. Investment returns were 3.7% per year for ELB and 3.2% per year for DLB.
The Financial Supervisory Service (FSS) noted, "Derivatives-linked notes are principal-protected products, but if the issuing securities firm goes bankrupt, principal and interest may not be repaid, and early redemption can result in principal losses, so investors should thoroughly review the product structure and risks before investing."