20161012-三星证券-3Q16_ELS_and_DLS_review_21页_941kb

Derivatives Issue Summary

Core Content

This document provides an analysis of the performance and trends in the issuance and redemption of Equity-Linked Securities (ELS) and Derivatives-Linked Securities (DLS) in the third quarter of 2016 (3Q16). It highlights the market dynamics, underlying asset preferences, and the impact of regulatory changes on the ELS and DLS markets.

Main Points

ELS and ELB Issuances and Redemptions

• Total Issuances: In 3Q16, ELS and ELB issuances totaled KRW10.8t, with ELS accounting for KRW9.8t and ELB for KRW1t.
• Quarterly Trends: ELS issuances increased by 36% compared to the first half of 2016, while ELB issuances declined by 68%.
• Year-over-Year: ELS and ELB combined issuances declined by 40% compared to 3Q15.
• Redemption Trends: Early redemptions increased significantly in 3Q16, reaching a monthly average of KRW3.7t, compared to KRW1.3t in 1H16.
• Market Recovery: The market showed signs of recovery, with ELS issuances hitting a ytd high in September due to rebounding stock markets.
• Underlying Assets: Index-based ELS accounted for 94% of total issuances in 3Q16, up from 84% in 2Q16. Domestic stock-based ELS dropped to 4% of total.
• Product Types: Principal-unprotected products made up 90% of ELS and ELB issuances, indicating a shift in investor preference.

DLS and DLB Issuances

• Total Issuances: DLS and DLB issuances in 3Q16 totaled KRW7.3t, down from KRW8.1t in 2Q16.
• Monthly Trends: Monthly DLS issuances averaged KRW1.4t in 2Q16 and KRW1.3t in 3Q16, showing a slight decline.
• DLB Issuances: DLB issuances dropped to KRW1t in 3Q16, compared to KRW1.1t in 2Q16.
• Market Factors: Stagnant commodity prices and rising bond-market volatility are cited as reasons for the decline in DLS and DLB issuances.
• Redemption Trends: DLS redemptions increased in August, exceeding issuances in September, while DLB redemptions were concentrated in 2Q.

Issuance Balance and Maturity Structure

• Outstanding Balances: As of end-3Q16, the total outstanding balance of ELS and ELB was KRW68.1t, down from KRW71.7t at end-2014.
• Maturity Trends: ELS and ELB with maturities of less than three years increased, while those with 10 years or more halved in 3Q16.
• DLS Maturity: DLS products had a more diversified maturity structure, with shorter and longer-term products increasing in 3Q16.

Issuer Performance

• Top Issuers: Top issuers saw a rise in principal-unprotected products, while some smaller issuers had declining balances.
• Market Concentration: Demand for ELS and DLS has concentrated among larger issuers, suggesting market inefficiencies and investor caution.

Key Information

Underlying Asset Trends

• EuroStoxx 50 and HSCEI: These indexes were the most popular underlying assets, with increased redemptions due to their stabilization.
• Nikkei 225: Usage increased sharply in 3Q16 due to higher volatility and yen depreciation.
• HSCEI and EuroStoxx 50: Early redemptions of these index-linked ELS were significant, contributing to the market's recovery.

Product Development

• New Underlying Assets: The usage of new underlying assets like the EuroStoxx Bank increased in 3Q16, but other assets like the TWSE and S&P/ASX200 saw a decline.
• Diversification Efforts: There is a growing trend towards using less common equity indexes to reduce dependency on a few major ones, which is expected to continue in 2017.

Regulatory and Market Conditions

• Market Inefficiency: The ELS and DLS markets are experiencing growing pains due to rising market inefficiency and regulatory changes.
• Investor Behavior: Investors are increasingly favoring principal-unprotected products and are more cautious about issuers' risk management and liquidity.

Summary Table

Conclusion

The ELS and DLS markets in 3Q16 showed signs of recovery, particularly in ELS, driven by stabilization of underlying assets and increased early redemptions. However, the DLS and DLB markets faced challenges due to stagnant commodity prices and rising volatility. The market is experiencing growing pains, with increasing concentration on large issuers and a shift towards principal-unprotected products. Diversification of underlying assets and product development are seen as critical for future market growth.