Over the past year Hungary has experienced an increased activity from foreign structured products providers entering the market with partially capital protected products.

Unicredit Onemarkets has capitalised on the growing demand for soft-protected products, but remains active with capital protected products too. "The demand for such structured products has increased in Hungary and we are well-placed to meet this trend," said Frank Weingarts (pictured), director, Unicredit Onemarkets "The new products are aimed at retail investors, however our capital at risk certificates are not distributed via the mass market but to the affluent segment."

Since 2015,  investors have lost interest in fully capital-protected funds, and turned to government bonds. However, now that the yield of these bonds has decreased as well, investors are looking for other alternatives investment solutions, which explains the shift towards capital at risk structures.

Unicredit's "express plus" range of autocallable structures offer an alternative yield-risk profile in the current market environment, according to Weingarts. "Autocallables with European barrier enjoy great demand as they address the need for yield," said Weingarts, adding that capital-protected products are also experiencing increasing attention as an alternative to government bonds which are becoming less attractive for distributors as well as investors.

Munich-based HVB Unicredit sold to Hungarian investors seven autocallable structures with European barrier linked to single shares and indices (worth €11m), last year. These structures were offered in euro, US dollar and Hungarian forint-denominated versions, which is a common practice across the market.

Year to date, the bank has marketed nine autocallable products (€14m) and one partially protected note - HVB EUR All-Time-High Note on Emerging Focus Strategy Index, linked to the Emerging focus strategy index, which is in subscription until September 20.

This 90% capital protected product offers higher participation than a fully protected structure, and allows dynamically lock-in so that the capital protection can increase during investment period.

When it comes to preferred underlyings and structures, single underlying drive most of the activity in Hungary. "We are cautious when it comes to underlyings and payoff types," said Weingarts. "We offer products on international single stocks and indices based on their demand and the tradability of these underlyings."

Unicredit also took the decision not to offer "worst of" structures or continuous barrier types in CEE markets as "we do not consider them suitable based on our conservative approach", according to Weingarts.


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