The total size of the Asian market for structured products sold to retail investors is estimated at approximately $79bn in gross sales in 2009.
The financial crisis that swept the global economy in 2008 and 2009 had a major impact on the Asia-Pacific retail structured product markets in particular in Hong Kong, Singapore and Taiwan.
The collapse of Lehman Brothers in September 2008 was the catalyst for a sharp downturn in sales as volatility spiked and risk aversion soared. This was felt especially in Hong Kong where the US bank’s credit-linked Minibond products had been widely distributed to retail investors.
At the end of 2009, USD230.6bn was held by retail investors in all forms of structured products, a drop of 5.5% from 2008. Taiwan, Hong Kong and China saw the largest declines as regulators investigated sales of Lehman-related structured notes, which were effectively banned. Along with Singapore, structured products in these regions, were frequently in the press, as law suits between distributors and investors continued throughout the year alongside regulatory investigations and public consultations. In Singapore and Hong Kong a number of parliamentary questions were tabled regarding structured products, their manufacture and distribution.
Japan and South Korea fared the best of the Asian markets in 2009. The Japanese economic setting for the year, which included recovering equities, low interest rates and an ageing investor population remained relatively benign for structured products issuers and distributors, while Korea’s buoyant market, although quieter in the first half of the year grew steadily as equities recovered and investor confidence returned.
Overall, by the end of the year annual sales had fallen by -38.1% across the region with significant falls in many markets. Taiwan (-87.3%), Hong Kong (-78.7%) and New Zealand (-70.0%) were the hardest hit suffering further declines on an already weak 2008 performance.
Regulations and market characteristics are widely different from one Asian country to another. However, a few common features can be drawn, in particular a distribution network dominated by local banks, the only real exception being Australia, with virtually no market for independent third party advice.
Annual gross sales (2008 & 2009) and 2010 forecast (USDbn)
A brief review of five main Asian markets markets (China, Hong Kong, Japan, Singapore and South Korea) is included here. For a more in-depth analysis of these and other Asian markets, please email us for information on our latest comprehensive Asian Research Report.