According to the Financial Supervisory Service (FSS) on April 9, the issuance of equity-linked securities (ELS) amounted to 81.1 trillion won (US$75.7 billion) last year, up 64.5 percent from a year earlier. The figure hit a record high since the debut of ELS in 2003.
Index-typed ELS, whose underlying assets consist of the price index of stocks alone, accounted for 91.5 percent of the total issuance. Among them, products combined with two or more underlying assets were used most, taking up 82.1 percent, followed by Euro index, KOSPI 200 index and S&P 500 index. The FSS said the issuance of ELS products surged as the global stock market and domestic stock market turned bullish and the demand for re-investment of early redeemed ELS grew.
The redemption of ELS surged as much as 109 percent to 95.1 trillion won (US$88.75 billion) last year, reaching an all-time high. This is largely due to the sudden rise of advanced redemption as the stocks on the global and domestic market, which are basic index, rose. With such large-scale redemption, the balance of ELS issuance stood at 55.2 trillion won (US$51.52 billion) at the end of last year, down 20.2 percent, or 14 trillion won (US$13.07 billion) from a year ago.
The issuance of derivatives-linked securities (DLS) amounted to 30.5 trillion won (US$28.47 billion) last year, up 4.4 percent from 29.2 trillion won (US$27.25 billion) at the end of the previous year, while the redemption of DLS remained at the same level at 27.8 trillion won (US$25.95 billion). Accordingly, the current balance of DLS totaled 34.8 trillion won (US$32.48 billion) at the end of last year, up 8.4 percent from a year earlier.
Securities firms saw its gains from DLS issuance and hedge operation surge to 719 billion won (US$671.27 million) last year compared to the losses of 260.8 billion won (US$243.49 million) at the previous year. The rate of return on ELS investment and DLS investment significantly improved to 4.6 percent and 1.6 percent, respectively, last year.