Vontobel is expanding its offerings to Asian investors with the launch of its first Type N callable bull/bear contracts (CBBCs), which have been listed on the Hong Kong Exchange (HKEX), almost ten months after the Swiss bank launched in Hong Kong a range of listed structured products.

"Besides the number of products, we have expanded our product suite by offering Type N CBBCs on the Hang Seng Index," said Long Lee (pictured), head of financial products at Vontobel in Asia. "Type N is a kind of CBBC for which the call level is equivalent to the strike level. Thus, investors will have more choices on leverage given the same call level."

CBBCs can be divided in two categories or types - R and N. Type N CBBCs are such that the call price is equal to the strike price, under which the investor will not receive any cash payment after the occurrence of a mandatory call event and will lose the entire investment. In the case of Type R CBBCs, the call price is different from the strike price and the investor may receive a residual cash payment upon the occurrence of a mandatory call event. However, in the worst case scenario, the investor may still lose the entire investment.

The senior management of Vontobel is committed to grow the bank's financial products business in Asia, according to Lee. "We want to be close to our clients. Close to them in multiple aspects including products, advice, technology, pre and after sales services," he said. "Moreover, at Vontobel, we always aim for providing the best market making quality to our listed products, which would mean a consistent pricing approach and a liquid secondary market so that investors would feel very comfortable dealing in our products."

Additionally, Vontobel's Deritrade remains among the major platforms for issuance of structured products used by market players in Asia. "Today, Deritrade operates as a successful single issuer platform in Asia among many institutional clients," Lee said, adding that the platform focuses not only on one single aspect of the chain. "It offers a proven comprehensive Straight-Through-Processing and a full life cycle management solution. As non-front office cost becomes more relevant than ever to our clients, our key and competitive edges will differentiate Deritrade from competitors and gain further market share."

Lee explained that considering the overall performance of the market for warrants and CBBCs in Hong Kong, year-to-date, 2018 has been successful as the total number of warrants and CBBCs has increased 60% year-on-year, from 6,900 in May 2017 to 11,000 in May 2018.

The most popular underlyings on the market remain the big blue chips name. However, market participants have showed an increased interest in pharmaceutical, construction materials, and mobile equipment manufacturing sectors, according to Lee.

New regulations will impact processes in the short run, and Vontobel sees new regulation as "another opportunity to improve overall quality of our service", Lee said, noting that there is still work to do.

"Vontobel and other issuers have been working closely with the HKEX in the past few months to form a framework for launching new product types in Hong Kong," he said. "It has been 13 years since the last introduction of a new product in Hong Kong, therefore we believe additional choices of investment is very likely to have a positive impact to the already active market."

SRP data shows that year-to-date, a total of 16,374 warrants and CBBCs worth HK$28.4m were issued in Hong Kong. Compared to the same period last year, issuance went up by 220% from 5,110, while sales volume increased only by 6% from HK$26.6m.

The number of warrants issued year-to-date is 5,011 with sales volume of HK$5.5bn, up from 1,124 warrants worth HK$1.6bn in the same period last year. Major distributors include Goldman Sachs with 683 warrants, Haitong Securities with 587, UBS with 564 and JP Morgan with 558. Popular underlyings include indices such as the Hang Seng Index (215 warrants) as well as stocks such as Tencent Holdings (429 warrants) and Ping An Insurance China (268 warrants).

On the other hand, there are 11,363 CBBCs worth HK$22.8bn issued in Hong Kong year-to-date, up from 4,086 CBBCs worth HK$23.3bn in the same period in 2017. Major distributors include Societe Generale with 2,124 CBBCs, Credit Suisse with 1,720, Goldman Sachs with 1.527 and UBS with 1,507. In terms of underlyings, popular among investors are the Hang Seng Index (4,812 CBBCs), Tencent Holdings (1,813 CBBCs) and Ping An Insurance China (742 CBBCs).

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