Leading Malaysian structured products provider CIMB Bank has launched its first reverse floater since the start of the financial crisis in 2008.
A senior source told SRP that this type of structure will allow investors greater choice in terms of underlyings and strategies in the interest rate asset class, as well as allowing them to diversify their risk exposure.
The callable feature in this product, said the source, will enable investors to receive their capital early in a volatile market.
The Callable Power Range Accrual with Inverse Floater FRNID is a five-year capital-protected income deposit based on an inverse floater payoff, paying a coupon that rises when the underlying reference rate falls.
The product is linked to the six-month Kuala Lumpur Interbank Offered Rate (Klibor) and, if the product is called before maturity, investors will be able to exercise the inverse floater option to receive the inverse floater coupon, subject to the performance of 3-month Klibor for the remainder of the investment term.
Reverse floaters are rare structures in the Malaysian market. According to the SRP database, there are three products with this payoff - one marketed by CIMB in 2008 and the other two by OSK-UOB and HSBC Bank in 2009.