Impact of the ‘Hong Kong H-Index’ Incident and Bank Selling Restrictions,
, ‘[Seoul=Newsis] Reporter Woo Yeon-soo – Last year, losses were concentrated in equity-linked securities (ELS) based on the Hong Kong H-Index, leading to an unusual annual ELS investment loss. The issuance balance hit its lowest level in a decade.’,
, ‘According to the Financial Supervisory Service (FSS) on the 22nd, a loss of 2.4 trillion won occurred in total ELS investments last year. This was because the maturity of the loss-fixed Hong Kong H-Index based ELS concentrated in the first half of last year. It was the first time since FSS began compiling data that the annual ELS profit and loss recorded a loss.’,
, ‘An FSS official stated, “It is the first annual loss in ELS investments since we started distributing press releases,” explaining that “the loss was concentrated in the first half of last year due to the Hong Kong H-Index peaking in 2021 and then plunging.”‘,
, ‘The issuance balance of all derivatives-linked securities, including ELS, ELB, and other linked DLS, DLB, decreased by 12.7 trillion won to 81.6 trillion won compared to the end of the previous year, marking the lowest since 2014. Last year’s issuance of derivatives-linked securities decreased by 5.3 trillion won to 73.6 trillion won, and the redemption amount decreased by 1.2 trillion won to 82.7 trillion won, with the redemption amount exceeding the issuance amount.’,
, ‘Of this, the issuance amount of ELS was 55.2 trillion won, a decrease of 7.6 trillion won compared to the previous year. This is attributed to reduced demand caused by the Hong Kong H-Index incident and major banks halting ELS sales. The proportion of principal-guaranteed products increased significantly from 51.2% to 70.9%.’,
, ‘By underlying assets, the issuance scale was as follows: ▲ KOSPI200 (18.6 trillion won) ▲ S&P500 (13 trillion won) ▲ Eurostoxx50 (11.8 trillion won) ▲ Nikkei225 (3.5 trillion won) ▲ Hong Kong H-Index (1 trillion won).’,
, ‘The issuance of non-principal-guaranteed ELS decreased significantly compared to the previous year, resulting in knock-in type issuances being reduced from 12.5 trillion won in the previous year to 6.6 trillion won.’,
, ‘The issuance size of DLS, based on interest rates, credit, exchange rates, etc., was 18.4 trillion won, an increase of 2.3 trillion won from the previous year. By underlying assets, the issuance amounts were: ▲ Interest Rate (13.3 trillion won) ▲ Credit (2.7 trillion won) ▲ Exchange Rate (1.5 trillion won) ▲ Commodity (100 billion won).’,
, ‘Of the 81.6 trillion won in derivatives-linked securities outstanding at the end of last year, the self-hedge amount was 55.2 trillion won, a decrease of 4.2 trillion won from the end of the previous year, but the proportion slightly increased to 67.7%.’,
, ‘The counterparties in back-to-back hedge transactions remain mostly foreign financial companies at 20 trillion won, representing 75.9%, with DLS showing a higher reliance on foreign entities compared to ELS.’,
, ‘The FSS stated, “Due to increased volatility in the global stock market this year, there are concerns about ELS investment losses, so we are strengthening monitoring and providing investor notices.”‘,
, ‘They also emphasized the importance of managing soundness among securities firms. The FSS stated, “As the scale of ELS margin calls increases due to significant declines in major international indices, the importance of securities firms’ foreign currency liquidity management is growing” and “We will strengthen monitoring of margin call occurrences and review securities firms’ emergency foreign currency procurement plans.”‘,
, ‘Additionally, “We will minimize securities firms’ use of issuance proceeds as proprietary assets and prevent excessive issuance expansion of derivatives-linked bonds through institutional improvements such as gradually limiting internal lending limits of derivatives-linked securities and bonds to 20% next year and 10% by 2027.”‘,
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