Sales of structured products in Germany in July declined by 19% year on year, continuing a downward trend and shadowing the fall in the VDax index, according to SRP data. Landesbank Baden-Württemberg was the most active provider with 179 structured instruments and 30% of issuance in July, followed closely by DZ Bank, which produced 138 products, with the two banks making up more than half of the month’s issuance. Vontobel was third, with increased volumes, while Landesbank Hessen-Thüringen and Credit Suisse each provided 90 products.
German investors do not see Greece’s political issues as a major threat for the Euromarkets but rather are positive about future investment opportunities, according to Lars Brandau, managing director of Germany's trade body the Deutscher Derivate Verband (DDV), regarding the DDV’s online survey about investment trends in July.
Income products – predominantly memory express certificates from LBBW and DZ – made up the greater part of the month’s issuance, while growth lagged behind with 32% of issuance. The increased number of Protect Multi Aktienanleihen by Vontobel over the month shows the need for alternative solutions while interest rates remain low. These products target investors without strong bullish or bearish expectations and deliver a predefined fixed coupon at maturity without completely eliminating the risk of the underlying equities.
The favoured payoffs remained knockout reverse convertibles with and without a memory feature, but ladder and uncapped call returns were in evidence: the former featured in the Vontobel Lock-in Protect Multi Aktienanleihe and the latter in the Millenium Anleihe product series with full and partial capital protection provided by BNP Paribas. The additional lock-in feature Vontobel guarantees investors repayment of their initial capital at maturity, given that during the life of the product the underlying reaches a predefined threshold, said Heiko Geiger, executive director of Vontobel in Germany.
The volume of products with capital protection up to 90% increased by 120% over the month, while products with more than 90% protection fell.
The Eurostoxx 50 continued as the preferred underlying in July, with the moderate decline of 5% in sales volume of index-based products over the month attributed to the ongoing Greek euro exit fears being met with a weaker reaction from markets than had been expected.
July was a good month for new underlyings from various industries added to the SRP database. On the Anglo-Dutch publishing company RELX Group, UBS issued a number of open end turbo call and put warrants providing respectively long and short positions in the publisher’s performance. There was also a reverse convertible on the Deka Dividendenstrategie CF (A), a fund investing in various sectors including finance, consumer staple and discretionary, and IT. This product allows investors to realise profits from established companies with above-average dividend expectations and stable growth.
Two other funds, both initiated by BNY Mellon, were featured as underlyings in the Unlimited Certificates of Commerzbank: MPF Herkules includes equity, fixed- and variable-income instruments, and MPF Andante invests predominantly in fixed income. Through a series of mini long certificates, BNP Paribas offered investors exposure to the US-based insurance company Cincinnati Financial, while Commerzbank issued a number of Best Unlimited Turbo and Capped-Bonus Certificates on PayPal after the company’s spinoff from eBay in July.
The full German market review for July will appear shortly.
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