China Merchant Securities (CMS) has made its debut in country's fast-growing structured product market with its first retail offering.
"We have been actively looking into equity-based products since last year, following the introduction of CSI 300 index futures in 2010 which made it possible for a formal and less costly channel of hedging for structured products," China Merchant Securities vice president Zhong Xin told SRP. "We worked very closely on this deal with China Merchant Bank, who acts as the sole distributor for this offering."
Yi Chu Ji Fa Series 1 is a six-month growth digital structure linked to the CSI 300 index. At maturity, the product offers a fixed yield of 7.1% per annum if the underlying index is above its initial level during the investment term, or 0.4% per annum if the condition is not met.
Zhong said that recent moves by the Central Bank - which have resulted in an increase of the funding rates - will bring down the cost of protection enabling better risk-return profiles for principal-protected structures.
The product has already reached the maximum issue size of CNY500m ($80.4m) after only three days into the initial offer period.
Zhong added that the bank is working with several distributors on similar structures and other payoff types, in particular those with standard options and higher leverage.