South Korea has kept its footing as one of the most burgeoning structured products markets in the first half of 2018. The sales volume in the country went up 33% to almost KRW39 trillion (US$35bn) in the first six months of this year compared to the same period in 2017, according to SRP data. A total of 6,520 products were issued, also up from the 5,659 recorded in the first half of 2017.

Mirae Asset Daewoo Securities, NH Investment and Securities and Samsung Securities - which are in the top five distributors, all had a sales volume exceeding KRW4 trillion. Mirae sales were close to KRW5 trillion, but was slightly down from the volume reached in the previous year. Samsung Securities, on its part, nearly doubled its sales volume during the first half of 2018.

Mirae Asset Daewoo Securities issued around 650 products worth roughly KRW5 trillion in the first half of this year. The amount of sales dropped around 6% from 1H 2017, when volume stood at over KRW5 trillion. The majority of the products are not capital protected and linked to a basket of indices, which in most of the cases include Eurostoxx 50 and Hang Seng China Enterprises Index (HSCEI). More than 460 products are tracking the performance of Eurostoxx 50, while around 400 products are linked to HSCEI along with other indices, equities or commodities.

Although its sales from structured products edged down, according to SRP data, Mirae's earnings report for the second quarter of 2018 shows that the securities firm's operating profit betyween April and June rose almost 25% from a quarter earlier to KRW225bn. The rise was helped by an increase in profits of the trading sector that includes derivatives management, such as equity-linked securities. The accumulated sales for the first half of this year from Mirae's Global Stock equity-linked securities (ELS) came in at KRW100bn, according to the earnings report. The operating profit generated from the trading department soared over 50% to more than KRW80bn.

The majority of the products issued by Samsung Securities (850 structures) were also linked to a basket of indices that include Eurostoxx 50 and HSCEI indices. The sales volume of those products stood at KRW4.1 trillion in the first six months of this year, rising a whopping 82% from the same period in 2017. The securities firm reported a 17% on-quarter drop in its operating profit for the April to June period this year, but compared to the previous year, the figure represented a 24% increase. The rise came despite a US$105bn stock blunder made by one of its employees. Samsung Securities accidentally issued 2.8 billion shares to employees in April.

NH Investment and Securities issued more than 700 products worth over KRW4.7 trillion. NH was the second largest distributor in the South Korean market, following Mirae. NH Investment and Securities posted a net profit of KRW245bn in the first half of this year thanks to favourable stock market conditions that drove up retail sales. NH Investment and Securities is a subsidiary of Nonghyup Financial Group and the net profit of the group in the first six months of this year reached a record high of KRW829.5bn. This marked an over 60% increase from the same period a year ago. The group's second quarter net profit also rose 12% from a quarter earlier, shooting above the KRW400bn level for the first time. The group explained the rise came on the back of an increase in the group's operating profit, while its bad debt reserves dropped drastically in 1H from the previous year.

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South Korea Market Review - January 2018