Headlines in the past week saw shrinking issuance amounts in South Korea, but Brazil and Germany are going from strength to strength.
New out of South Korea isn’t looking too positive, as the traded volume of structured products there fell by 20.1% in 2021 year-on-year (YoY) despite a rebound of equity-linked securities (ELS). This is a 42.1% decline from the peak seen in 2019.
While ELS grew 15.1% to KRW48.8 trillion collected from 15,807 products in 2021 YoY, all other types of structured products declined by issuance amount, SRP data shows.
More people [...] are investing in equities directly but also via derivatives - Anouch Wilhelms, Société Générale
Derivative-linked securities (DLS) and derivative-linked bonds (DLBs) were down 31% and 33.7% to KRW5.4 trillion (766 products) and KRW9.4 trillion (949 products), respectively, and equity-linked bonds (ELBs) saw the biggest decline by 65.6% to KRW9.5 trillion (1,542 products) YoY. The overall issuance amount reached a five-year low at the end of 2021, according to SRP data.
In Germany, Société Générale’s derivatives business in Germany which focuses on products bought on exchange by self-directed private investors - the public distribution side of the market - took 12.9% of that market and is seeking to increase its market share after the successful integration of the Commerzbank structured products books.
The positive market sentiment over the last two years has also attracted new investors seeking to participate in growth stories.
“We saw this trend in Germany in 2020 but also in 2021. More people have entered the equities market and are investing in equities directly but also via derivatives,” said Anouch Wilhelms, director, derivatives, head of public distribution media at Société Générale Corporate and Investment Banking.
The Brazilian structured products market recorded estimated sales volumes of US$99m for 51 products tied to mutual fund underlyings in 2021, SRP data shows.
Sales of fund-linked structures in Brazil have staged a memorable come back after a two-year lacuna. Last year’s issuance and sales signal a bounce back from a once booming sector that yielded roughly US$543m in 2018, and subsequently shrunk to just US$12.4m in 2019. This figure further decreased to US$2.9m in 2020.
In 2021, however, mutual funds ranked as the third most popular underlying sector after risk control which accrued an estimated US$209m over 106 products, and Asia Pacific, which collected roughly US$120m over 24 products.
Halo has announced the launch of a new structured note offering tied to the Morningstar Wide Moat Focus Index. The index focuses on US companies that Morningstar believes to possess sustainable competitive advantages or ‘economic moats’. The structured notes allow financial advisors to have equity exposure to the Morningstar Wide Moat Focus Index with the extra benefit of downside protection, which can help investors anchor their long-term portfolio strategies.
The SRP US database lists 21 structured notes linked to Morning Star Wide Moat Focus indices, with strike dates dating back to October 2007. The majority were issued on the paper of Goldman Sachs (16 products), while there were also products from HSBC Bank (three), Deutsche Bank and Citigroup (one each).
UBS has relocated a managing director from Hong Kong SAR to New York to serve as co-head of global markets sales for Americas. The head of global markets (GM) sales for Apac, Daniel Murphy, has moved to New York after leaving his position in Hong Kong SAR in December.
Eric Lafon, to whom Murphy used to report to, has assumed the responsibilities of the role ad interim in addition to his existing role as global co-head of global market sales based in Singapore, a UBS spokesperson told SRP.
In his new role, Murphy reports to Derek Capanna, head of global markets, Americas at UBS, who joined from Deutsche Bank in 2015. He succeeded Mark Ratcliffe, who was named global head of investment banking (IB) integrated client lifecycle services at UBS in New York in January, according to a senior source.
Picture credit: Flaticon