Société Générale (SG) has become the first foreign institution to reintroduce structured notes to the Singapore market, seven months after a rule revamp came into effect.
Julien Lascar, head of distribution and equity solutions, Asia at SG in Hong Kong, said the new SGD Equity Magnifier Notes will be available until 27 September. They are being distributed by Citibank.
The notes are linked to a basket of Singaporean stocks comprising Keppel Corporation, OCBC, Sembcorp Marine, Singapore Telecommunications and Singapore Press Holdings. They offer a fixed coupon of 2% in the first year as well as an equity-linked coupon for the remaining term, calculated as an interest rate of 0.2% to 0.3%, multiplied by the number of shares that close at 105% of their initial level on each annual observation date.
"The structure is more of a fixed-income structure instead of pure equity," said Lascar. "It offers a fixed coupon in year one and a minimum coupon for the remaining term of the notes. To reach the maximum payout, there is an equity-linked component but it's not a purely equity bet."
The product was specifically designed for the Singapore market, to conform to the new regulations, and is targeting local retail investors seeking to invest in products denominated in Singapore dollars. Retail investors have the choice of five to six-year tenors or much shorter terms, said Lascar.
"There are not many things medium term and we felt this could be comforting for investors to have something in that bracket which was income bearing," he said. "The idea is to find a gap in product offering and we believe these notes, in the current Asian environment of low interest rates with moderate or high inflation, will be in demand."
The notes have a tenor of three years and 11 months but will pay a full 12-month coupon for the final 11 months.
The note is issued by SG (Paris), so the investor is exposed to the creditworthiness of the issuer, not an SPV, subsidiary or affiliate in addition to the credit risk of the custodian and the distributor.
"We are hopeful that we will be able to register more products and we're convinced the space will pick up," added Lascar. "That has been true for Japan, Taiwan and Hong Kong, with good pick- up of retail offerings overall. Interest rates are very low and any solution with low minimum investment demand is something that can attract retail interest."
It is understood that the French firm is working on a second and third series to launch by the year's end, subject to regulatory and distributor approval.