With interest rates on the rise, products linked to commodities and hybrid-linked structures are gaining momentum in Singapore, according to Edward Lee, head of global market sales for Southeast Asia and India at Societe Generale.

Despite a slowdown in demand at the beginning of the second quarter this year, market activity has improved, with equity-linked structured products transactions resuming for reasons behind the rebound after a "phenomenal growth" in the first three months of this year, according to Lee.

The best-selling structured products in Singapore this year are classic structures such as autocallable notes and OTC accumulators, according to Lee. It is important to differentiate between the mass affluent and private banking when it comes to product preferences as different clients have different needs and, therefore, offerings vary depending on the investors' needs, according to Lee.

The French bank's offering in Singapore is based on its cross asset set up and a multi-asset solutions catalogue built on equity, credit rate, commodities, foreign exchange and funds. "Given such an extensive platform, we have a very good view of the investor interest in the market," said Lee. "Last year, the market was doing very well but it was very equity-driven and investors showed a strong inclination towards products linked to stocks such as US tech stocks, European, Hong Kong, and China-related Hong Kong stocks."

This year, however, has "a different flavour", following the spike in volatility in February and the correction in the equity markets, according to Lee. "Interest shifted from equity-linked structures towards products linked to commodities and more specifically to oil," said Lee. "[But] interest towards currency-linked structured products has dropped as well."

"Given the excessive volatility that we have experienced recently, we see that investors are looking for products that give the possibility of receiving back part of the initial investment and are offering glider knockouts for instance," said Lee. Equity-linked structured products in 2017 did not, generally, have capital protection features, because the market was performing very well. "However, it is still not quite possible to have products that allow unconditionally to get back their notional on short-dated structures."

Regarding daily leverage certificates (DLCs), the bank has seen an uptake in the investor's interest towards these products which were introduced in the summer of 2017. The French bank launched its first range of DLCs on the Singapore exchange, which comprised a suite of three- and five-times leveraged structures linked to equity indices. In January 2018, SG launched a second suite of DLCs, this time offering seven times leverage.

Following the successful launch, the bank is now exploring opportunities to expand the range with single stock products.  "At first, the DLCs were only linked to indices," said Lee. "Currently, we are enhancing to single stocks in order to introduce more variations to the market, because we have been listening to our brokers and investors on what they want to see from us."

Lee remains optimistic about the future of the market in Singapore because it is "very innovative and sophisticated... Distributors always give us a very clear idea of what they want to see," he said. "Thus, we work together with them on the product design. Nowadays, investors in Singapore want to have more protection features. This is the case for both equity and fixed-income structured products."

The challenges that the industry is facing come from the introduction of new market regulations, according to Lee. "The main question that remains [is], to what extend Mifid 2 will trigger more adjustment," said Lee. "But there is nothing negative in it. At the end of the day, these regulations were introduced to protect investors."

Related stories:

Demand for leverage in Singapore on the rise, Societe Generale

Societe Generale introduces new DLCs in Singapore

Societe Generale debuts daily leverage certificates in Asia on SGX