Latest: USD/JPY inverted vol term-structure cheapens one-year hedge

The USD/JPY pair could collapse in a hard-landing scenario in view of additional exogenous inflation shocks, more China economic lockdowns and a serious financial market plunge (potentially caused by monetary policy mistakes), according to a cross-asset research published today (20 June) by Société Générale (SG).

The USD/JPY is still trading close to its tops, offering an attractive entry point to hedge portfolios

‘Equities have started to slide, but the USD/JPY is still trading close to its tops, offering an attractive entry point to hedge portfolios with out-the-money (OTM) puts,’ stated the report. The USD/JPY topside acceleration generated short-term volatility, which led to a significant inversion of the implied volatility term-structure. This has cheapened medium-term volatilities compared to the front end.

‘A European digital option with a strike between those of the put spreads is an attractive alternative, as it can generate a leverage of 10 in one year. The put spread is slightly less leveraged but provides earlier gains,’ the report stated.

SRP registers 58,504 live USD/JPY-linked structured products with a concentration in Germany or Austria wrapped as leverage certificates. In Apac, there’re 33 in China, 31 in Japan and seven in Taiwan in the form of deposit, wealth management product, notes, life insurance or fund, according to SRP data.     

HSBC Malaysia follows China ESG target vol lead

HSBC Amanah has launched a MYR-denominated structured product offering full principal protection on the back of the Morningstar Exponential Technologies ESG Screened Target Volatility 7% Select Index, in Malaysia. The launch, on 13 June, comes after the UK bank introduced the index in China via a two-year structured deposit with an Asian up-and-out option, early last month.

“We [expect] to continuously have this product on our shelf for the next few months for a tenor of up to five years,” an HSBC spokesperson told SRP. “We can offer this in other currencies as well subject to client’s demand. The payoffs we typically offer are simple growth payoff and its variations.”

During the past year, HSBC Malaysia has also offered structured products tracking the performance of the MSCI World ESG Screened 5% Daily Risk Control Index, according to the spokesperson. The underlying index was also made investable in China, marking the first MSCI index used by HSBC China in the structured product market.

'HSBC’s ability to partner with various established Index providers such as Morningstar to provide our retail and institutional clients in Malaysia access to customised innovative products, will enable them to stay connected to the latest global thematic investing trends,' said Alvin Kong (above right), head of markets and securities services at HSBC Malaysia.

Citic CLSA onboards Extramile in Hong Kong SAR

Hong Kong fintech Goldhorse Capital Management has signed a co-operation agreement with Citic CLSA, a subsidiary of China’s Citic Securities. The offshore arm of the securities house is set to join Extramile, which delivers multi-issuers request for quotes (RFQs) for structured products for private banks, brokerage houses and external asset managers.

Ka Long Lee (right), CEO of Goldhorse, said the partnership with both the buyside and sell-side of Citic Securities will deliver mutual benefits.

‘Extramile ecosystem has now another competitive issuer, Citic CLSA, providing a wider range of choices for our members,’ he said, adding the capabilities of the platform ‘from price discovery to trend analysis, from trade execution to life-cycle management, provides all-round and bespoke solutions that matches the digital ambition of Citic Securities Wealth Management (HK)’.

James Xu, head of equities derivatives & prime brokerage and CEO of wealth management at Citic CLSA, said the partnership will help to accelerate the transformation and upgrading of the bank’s wealth management business ‘to provide clients with a wider variety of products and services,’.

Luma Financial Technologies adds LS Advisors to platform

Multi-issuer structured products and annuities platform Luma Financial Technologies has onboarded Paris-based investment advisory firm LS Advisors, which offers bespoke structured product solutions to independent wealth managers in France, Asia, the Middle East, and Africa.

‘We look forward to working closely with LSA to help them manage their portfolios of products, facilitate distribution of new products and enable them to easily create tailored solutions optimised to meet their clients’ needs,’ said David Wood (right), managing director of Luma’s international business.

The partnership follows the recent addition of structured product issuer Marex Financial Products to the platform.

SG taps FIS for derivatives back-office

The French bank has selected US financial technology provider FIS to transform its derivatives back-office technology by adopting the FIS cleared derivatives suite to replace its legacy clearing and settlement software.

‘The listed derivatives clearing business is a core part of our prime services business franchise at Société Générale,’ said Christophe Lattuada, COO of global banking and investor solutions at the bank. “Our decision to select FIS to provide our next generation post-trade clearing technology, represents a significant investment, with a trusted partner, to support the long-term growth of this business.”

The contract builds on an existing partnership between the two. In 2019, SG picked FIS payments-as-a-service (PaaS) solution to serve its corporate clients in Europe, excluding France, through the Single Euro Payments Area instant credit transfer scheme.

CICC becomes first Chinese member of SIX Swiss Exchange

This month, the UK arm of China International Capital Corporation (CICC), the first Chinese investment bank, has joined SIX Swiss Exchange in an attempt to ‘better connect the capital markets and investors between China, Switzerland and Europe,’ according to Xinhan Xia, CEO of CICC UK.

Established in 2009, CICC UK provides a central platform from which the bank facilitates cross-border investment and financing services for clients from Europe, the Middle East and Africa who do business with China, and from China seeking cross-border investment in and financing from these regions.

A spokesperson at CICC told SRP that the bank has no plans to issue structured products on SIX at the initial stage.

Q1 22 marks new premium growth for US annuities

Total US life insurance new annualised premium increased 17% in Q1 22, representing the fifth consecutive quarter of double-digit premium growth, according to LIMRA’s First Quarter 2022 U.S. Retail Life Insurance Sales Survey.

‘Nearly half of life insurers reported premium gains in the first quarter but the majority of the growth came from the top 10 carriers. Nine of the top 10 reported double-digit growth. Combined, their sales increased 32% from last year,’ said John Carroll, senior vice president, head of insurance and annuities, LIMRA and LOMA. ‘While the overall number of policies sold was lower than the record sales set in first quarter 2021, policy sales matched pre-pandemic levels.’

Indexed universal life (IUL) new annualised premium jumped 39% in the first quarter. Although two thirds of carriers reported increases in IUL premium, most of the growth stems from the top 10 carriers, representing more than 80% of the IUL sold in the quarter. Policy count increased 8% in the first quarter. IUL premium market share was 28% in Q1 22.

Fixed universal life (UL) new annualized premium rose 2% in the first quarter. While current assumption products drove the overall growth for fixed UL (up 24%), growth was stunted by lifetime guarantee UL sales, which fell 27%. Despite the gains in premium, fixed UL policy sales fell 9% in the first quarter and its market share decreased to 7% of the total US life insurance market.

Variable universal life (VUL) new premium surged 50% in the first quarter with 89% of the premium coming from the top 10 carriers. This is the 18th consecutive quarter of premium growth. Policy sales grew 28% in the first quarter. VUL held 13% of premium market share in the first three months of 2022.