ELS Issuance Reaches 21.7 Trillion Won in First Half, Up 19% Year-on-Year

The issuance amount of equity-linked securities (ELS), a highly volatile financial investment product, reached 21.7316 trillion won in the first half of this year, marking an 18.6% increase compared to the same period last year.

On July 21, the Korea Securities Depository announced that the outstanding balance of ELS issued in the first half of this year stood at 53.5548 trillion won, up 5.5% from the same period last year. ELS are derivative securities linked to specific stocks or indices. Due to their complex structure and high risk of principal loss, they are considered "high-risk financial investment products" within the industry.

The number of ELS products issued in the first half of this year was 6,120, representing a 7.8% increase from the same period last year. In terms of issuance type, public offerings accounted for 84% of the total issuance amount, while private placements made up the remaining 16%.

By underlying asset type, "index-type ELS," which are based on domestic and overseas indices, accounted for the largest share at 52.2% of the total issuance amount. "Stock-type ELS," which use individual stocks as their underlying assets, made up 42.5%.

In terms of major market indices, ELS linked to the US S&P 500 and Europe's EURO STOXX 50 were issued in the amounts of 8.0248 trillion won and 7.1799 trillion won, respectively, in the first half of this year. ELS reflecting the domestic KOSPI 200 index reached 8.9072 trillion won in issuance. ELS using the Hong Kong H Index and Japan's Nikkei 225 Index as underlying assets were issued in the amounts of 573.8 billion won and 2.7167 trillion won, respectively.

Korea Investment & Securities ranked first among ELS issuers, accounting for a 17.5% share of the issuance amount in the first half of this year. Samsung Securities (10.7%), Hana Securities (10.3%), Shinhan Investment (8.2%), and Mirae Asset Securities (7.4%) followed.

The redemption amount for ELS in the first half of this year was 19.7001 trillion won, a 43.5% decrease compared to the same period last year. By redemption type, maturity redemptions and early redemptions amounted to 9.4768 trillion won and 8.5199 trillion won, accounting for 48.1% and 43.3% of the total redemption amount, respectively. Interim redemptions totaled 1.7034 trillion won (8.6%).

Due to their inherent high volatility, ELS products such as those linked to the Hong Kong H Index caused significant losses last year, sparking controversy over misselling (inadequate explanation of investment risks). Recently, the Financial Services Commission announced a revision to the "Enforcement Decree and Supervisory Regulations of the Financial Consumer Protection Act," requiring financial companies to thoroughly consider all six categories of customer information?including transaction purpose, assets, and risk attitude?when selling ELS.