Financial Supervisory Service Announces First Half Derivative-Linked Securities Status
ELS Issuance Amount 18.3 Trillion Won
ELS Redemption Amount Up 30.0% YoY
Demand Shrinks Due to Losses in H Index-Based ELS
The issuance amount of derivative-linked securities in the first half of this year decreased compared to the first half of 2023 (previous year), while the redemption amount increased compared to the previous year. This was due to the concentration of maturity redemptions of Hong Kong HSCEI index equity-linked securities (ELS) and a decline in demand.
According to the Financial Supervisory Service on the 27th, the issuance amount of derivative-linked securities in the first half was 27.5 trillion KRW, down 3.7 trillion KRW from 31.2 trillion KRW in the same period last year. During the same period, the redemption amount was 39.4 trillion KRW, up 3.9 trillion KRW from 35.5 trillion KRW in the same period last year.
Specifically, ELS issuance was 18.3 trillion KRW, down 16.4% (3.6 trillion KRW) compared to the same period last year. During the same period, principal-protected ELS issuance amounted to 10.4 trillion KRW, up 76.3% (4.5 trillion KRW) compared to the same period last year.
The Financial Supervisory Service explained, "This is due to a balloon effect caused by the contraction of principal-guarantee ELS issuance and the high-interest-rate environment that allows issuers to pay high yields," adding, "The decrease in principal-guarantee ELS issuance in the first half compared to the same period last year was largely influenced by reduced investment demand due to losses in H index ELS."
The issuance amount of index-type ELS, whose underlying assets consist only of stock indices, was 9.2 trillion KRW, down 44.9% (7.5 trillion KRW) compared to the same period last year. It accounted for 50.5% of the total ELS size, down 25.8 percentage points from 76.3% in the same period last year.
The redemption amount of ELS in the first half was 32.9 trillion KRW, up 30.0% (7.6 trillion KRW) compared to the same period last year. The maturity redemption amount in the first half was recorded at 17.2 trillion KRW. Maturities of H index ELS were concentrated in the first half of this year, increasing by 126.3% (9.6 trillion KRW) compared to the same period last year; however, maturities of principal-protected ELS included in retirement pensions were concentrated at the end of the year, resulting in an 11.3% (2.2 trillion KRW) decrease compared to the previous half-year (second half of 2023).
The outstanding balance of ELS was 50.7 trillion KRW, down 24.3% (16.3 trillion KRW) from 67 trillion KRW at the end of last year (December 2023). During the same period, the outstanding balance of principal-protected ELS increased by 10.9% (3.4 trillion KRW) to 34.6 trillion KRW from 31.2 trillion KRW at the end of last year.
The outstanding balance of principal-guarantee ELS was 16.1 trillion KRW, down 54.9% (19.6 trillion KRW) from 35.7 trillion KRW at the end of last year. This was also largely due to the concentration of maturity redemptions of H index ELS in the second quarter of this year.
Meanwhile, the issuance amount of DLS in the first half of this year was 9.3 trillion KRW, unchanged from the same period last year. Public offering DLS issuance was 3.9 trillion KRW, down 26.4% (1.4 trillion KRW) compared to the same period last year. Private placement DLS issuance was 5.3 trillion KRW, up 32.5% (1.3 trillion KRW) compared to the same period last year.
The total redemption amount of DLS was 6.6 trillion KRW, down 35.3% (3.6 trillion KRW) compared to 10.2 trillion KRW in the same period last year. The outstanding balance of DLS was 29.8 trillion KRW, down 1.7% (50 billion KRW) compared to the same period last year.
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