Korean SP investors show appetite for soybeans

Fluctuations in the equity market and the strengthening of the US dollar have pushed South Korean product providers to look for alternatives that can capitalise on the positive outlook of agricultural commodities.

In July, SK Securities and Dongbu Securities issued five and two derivatives linked bonds (DLBs) in the retail and private banking segments featuring soybeans futures which sold KRW2.4bn (US$2m) and KRW61m, respectively.

“The price of agricultural commodities futures has hit its lowest level, and we positively view the rise of agricultural commodities, especially soybeans futures,” said YunHae Lee, vice-president at SK Securities, which is offering simple digital and uncapped call structures with 100% of capital protection. “That has been another appealing point for individual investors as the need is already there in the market.”

Sales of derivative linked securities (DLSs) have increased sharply during the first half of this year, according to Jungho Lee, vice-president at Yuanta Securities. “[This means] that investors are vigorously betting on the rise of the US federal funds rate through DLBs featuring commodities, as it allows investors to have exposure to commodities underlyings that may benefit from this macroeconomic environment while guaranteeing their principal.”

Thanks to both the rise of the federal funds rate in the US and positive long-term outlook of commodities, the firm is confident the sales volume of DLSs will keep on growing in the second half of this year as well, said Lee.

SRP data shows that as of July 2015 the total sales volume of DLSs and DLBs has reached KRW3.5tr year to date, which is an 46% increase compared with the same period last year. The total sales volume for the whole of 2014 was KRW4.7tr.

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Korean SP investors show appetite for soybeans