The amount of equity-linked securities (ELS) and derivatives-linked securities (DLS) issues reached a record high last year.
The combined value of ELS and DLS issued by securities firms in 2018 came to 115.90 trillion won (US$101.48 billion), according to the data from the Financial Supervisory Service (FSS) on April 11. The figure went up by 4.30 trillion won (US$3.76 billion) from the previous record set in 2017.
ELS issues rose by 5.60 trillion won (US$4.90 billion) on-year to 86.70 trillion won (US$75.91 billion) last year as the government maintained its interest rates low and the stock market was bearish, leading to a rise in demand for such products.
For ELS, public offerings accounted for 84.5 percent, while principal protected issuance took up 21.5 percent. By type of issuance, step-down ELS, which is designed to deliver a return dependent on the performance of a stock market index, accounted for 90.2 percent.
By underlying asset, the Euro Stoxx 50 showed the highest amount of issuance with 58 trillion won (US$50.76 billion), followed by the HSCEI index with 49.90 trillion won (US$43.67 billion), the S&P500 index with 40.20 trillion won (US$35.18 billion) and the KOSPI 200 index with 35.10 trillion won (US$30.72 billion).
The amount of ELS issues which track the HSCEI index as underlying assets had nearly tripled from 16.80 trillion won (US$14.71 billion) a year earlier as the voluntary restriction of reduction of the HSCEI index ended at the end of 2017. The amount of DLS products fell by 1.30 trillion won (US$1.14 billion) on-year to 29.20 trillion won (US$25.56 billion) last year. The amount of ELS redemptions stood at 67.40 trillion won (US$59.01 billion) last year, down 29.1 percent from a year ago, while that of DLS redemptions dropped by 11.5 percent on-year to 24.60 trillion won (US$21.54 billion).
The estimated value of assets operated by securities companies as funds for issuing derivatives-tied securities came to 113.20 trillion won (US$99.14 billion) as of the end of last year. Bonds had the highest proportion at 72.2 percent, followed by deposits with 19.8 percent and other assets at 10.7 percent, such as fund, trust and loan. However, the profit of ELS and DLS investors stood at 2.30 trillion won (US$2.02 billion), which was even less than half of 4.80 trillion won (US$4.21 billion) in 2017, due to a drop in advanced redemption.