BNP Paribas has launched the Eurostoxx 50 10% Klik & Klaar Note juli 2016-2021 in the Netherlands. The note, which knocks out early - on each anniversary - if the index closes at or above 2,800 points, is the fifth in the bank's Klik & Klaar series and the fourth linked to the Eurostoxx 50.
The Klik & Klaar product range was originally introduced by ABN Amro back in 2005 and is not a new concept as such, according to Frans Kuijlaars (pictured), head of structured products solutions sales the Netherlands, BNP Paribas. "Our team started out at ABN Amro before joining BNP Paribas via Royal Bank of Scotland," he said. "Last year we decided to launch [Klik & Klaar] as a product line, next to our memory coupon notes, because of the strong demand for these products from the market. We now have five products live."
The correction, which has taken place in the financial markets since mid-2015, and the increased volatility, means that BNP Paribas is able to offer attractive conditions for the product, with a potential annual coupon of 10% and a protection level of 1,425 points, according to Kuijlaars.
Although the strike level is 2,838.17 points, the bank has opted for a knock-out level of 2,800 points (98.661% of the strike) and a barrier of 1,425 points (50.211% of the strike). "We always use round figures for our barriers. Our experience is that investors find it easier to remember a protection level of 1,425 instead of 1,419.085 which is 50% of the initial level," said Kuijlaars.
"In the past we used to call that Sacha de Boer investing," said Kuijlaars. De Boer used to read the Dutch eight o'clock news (NOS Journaal) between 2003 and 2013 and, according to Kuijlaars, if the AEX was mentioned on the news you knew there was something going on in the financial markets because "unlike the weather forecast you don't get news on the AEX every day". "If the AEX had received a blow De Boer would say that the AEX had closed at, say for example, 312 points. If you had a partially capital protected product, or a coupon product with a barrier at 300, you knew straight away that you were still on the right side," said Kuijlaars.
The barrier of 1,425 points is of course at a very low level, in both relative and absolute terms, according to Kuijlaars. "If you, as an investor, have the vision that between now and five years the product closes at least once at or above 2,800 points on the anniversary, you achieve 10% return per year, depending on how long the product has run. If your vision does not materialise you are still protected up to 1,425 points, based on daily closing levels," he said.
"It's an alternative for equities. It is not a bond, but in our opinion, it's a product that matches the current market conditions," said Kuijlaars who has seen demand for the product from both asset managers and private banking clients as well as do-it-yourself investors who have an account with a broker.
Four out of the five Klik & Klaar notes which have been issued by BNP Paribas since March 2015 are linked to the Eurostoxx 50; the remaining product is linked to the S&P GSCI Crude Oil index.
The Eurostoxx 50 is the most widely deployable index in the portfolio of clients, according to Kuijlaars. "Investors want to invest in Europe and the vision for European equities is that there is a recovery in Europe. Not that from now on all lights have turned green, or that all graphs point towards the north-east, but still. To that extent the Eurostoxx 50 suits investors who want to invest in Europe in euro.
"For us there could be several reasons to launch a product. It could be a client event, a market event or a product event but also in case a product is autocalled or is deep in the money," said Kuijlaars. The Klik & Klaar linked to the oil index which BNP Paribas launched last year came at a time when oil was very much in the news, according to Kuijlaars. "That became more of a market event. The oil price went down very fast and there was just a lot of volatility. Back then there was a client who asked for this and we then decided to use the oil index as underlying," said Kuijlaars.
"It is not an irrefutable and absolute fixed law that we say 'now we are going to introduce this product'. It depends on the market conditions and what the customers want."
Kempen goes public with bonus notes
SocGen enters Dutch market with daily certificates, turbos on the cards
ING teams up with ABN Amro for rare public offer in the Netherlands
BNP Paribas: Investors grateful to Draghi and AEX