Popular ELS

 

Investors are rushing to equity-linked securities (ELS), one of the most typical mid-risk, mid-return investment options. The amount of issue per month has increased from 5.8418 trillion won (US$5.2937 billion) to 7.235 trillion won (US$6.5561 billion) between last month and this month.

Recent ELS products are characterized by higher stability and lower profitability than before. Also, foreign stock-based ones are increasing their popularity, while the chance of early redemption within three years is going up. Specifically, the early redemption portion increased from 3.3971 trillion won (US$3.0782 billion) to 4.8128 trillion won (US$4.3610 billion) between January and February this year, and already reached 4.5703 trillion won (US$4.1415 billion) this month. This implies that investors are seeking stability.

These days, ELS products are incorporating more and more foreign stocks for better risk hedging. For example, Daishin Securities released the 100 Trillion Club ELS on March 16. Leading companies with a market cap of at least 100 trillion won (US$90.6 billion) constitute the ELS, and the securities company selects those showing little volatility with research centers. Kiwoom Securities is expected to release a similar ELS on the last day of this month.

Another trend is the increasing popularity of index ELS, which can be attributed to last year’s poor performance of the Korean stock market. The total issue for this month is about 4.6 trillion won (US$4.2 billion), a one-year record, with most of them having foreign indices such as Hang Seng and Eurostock 50 as their key assets.

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