Investors in Peru are demanding structured notes as they look for alternative investment views, according to Manuel Meza (pictured), managing director, global structured solutions, Latin America at BBVA Bancomer. The bank has issued more than 15 structured products in the Peruvian market worth US$100m linked to equity and foreign exchange underlyings.
"In the last three years, the saving class and private banking sectors in Peru have grown and become more interested in different kinds of investments," said Meza. "We are betting that, in the medium term, this market is going to keep growing in double digits."
Structures used for equity products include monthly Asian, European and digital call options, while foreign exchange products were issued with twin win, call spread and digital range payoff structures. "Investors are looking for new alternatives to which they do not have easy access in those countries," said Meza. "As investors get into markets that they could not easily get exposed to, they start to ask for more - the vehicle we have found that is very useful for them is the structured note."
With a notional nearing US$19m, the highest selling product offered exposure to a basket of big data stocks, including EMC Corp, Hewlett Packard, Intel, Microsoft, Oracle and VMware. The product featured a one- or 1.5-year term and features a monthly Asian call with a knockout option. "Peruvian structured notes investors are selective in sectors," said Meza. "There is not much linked to the Eurostoxx, but, instead, there are segmentations, such as a big data basket, which is not something we see done in Mexico."
Three products are linked to the Eurostoxx 50, Eurostoxx Low Risk Weighted 50 and Stoxx Europe Small 200 indices, worth a collective US$17.5m. The remaining equity products are linked to the SPDR S&P 500 ETF, iShares US Real Estate index, Health Care Sector SPDR Fund, along with baskets of global companies, and the following sectors: food & drink, Mexico, US infrastructure and big data. "From 2014 to 2015, there was a big switch from foreign exchange to equity products," said Meza. "In 2014, a lot of structures were shorter term and were linked to currencies, but, due to the volatility in currencies in 2015, there was an increase in the equities asset class."
The four foreign exchange products are linked to the US dollar against the Swiss franc, the euro, the Japanese yen and UK sterling exchange rates, and collectively sold US$23m.
According to SRP data, BBVA has 421 live structured products in Spain, Portugal, Mexico and Chile. The bank is most active in Mexico, with 332 products, followed by Spain, with 65 products.
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