The Financial Supervisory Service announced on Dec. 25 that the derivative-linked securities (DLS) balance totaled 111.2 trillion won at the end of September this year, down 4.3 percent in three months, and the balance decreased for the first time since the fourth quarter of 2017 due to factors such as U.S.-China trade disputes, the Hong Kong protests and losses related to German government bond-based derivative-linked funds (DLFs).
Specifically, the equity-linked securities (ELS) and equity-linked bonds (ELB) issuance fell by 9.8 trillion won or 35.3 percent with the HSCEI-based issuance falling 39.9 percent to 11.9 trillion won. In the third quarter, the ELS and ELB redemption decreased 4.2 trillion won to 21.7 trillion won.
The DLS and DLB issuance fell 24.4 percent to 6.5 trillion won whereas the DLS and DLB redemption increased 4.2 percent to 7.5 trillion won.
In that quarter, the DLS and DLB yield dropped from 3.4 percent to 1.5 percent and securities companies’ profits related to DLS issuance and operation added up to 68.6 billion won, down 74.1 percent from the previous quarter.
At the end of September, the appraised value of DLS issuers’ assets based on their DLS issuance was 124.7 trillion won, including 79.3 trillion won in bonds.