Derivative-linked bonds (DLB) have remained more popular than derivative-linked securities (DLS) in the first quarter of 2021 in South Korea despite a drop in sales.

Sales of DLB fell 15.5% to KRW3.8 trillion in Q1 21 quarter-on-quarter (QoQ) as issuance decreased 26.2% to 223. In the meantime, the same number of DLS was issued, totalling KRW1.5 trillion, up 40.3% QoQ, according to data from the Korea Securities Depository (KSD).

Together this was a 11.3% and 4.7% drop of issuance and sales volume, respectively, QoQ. On a yearly basis, Q1 21 saw issuance dip 42.9% but maintain a stable volume. Public and private offerings accounted for 10.7% and 89.3%, respectively, of volume.

In addition, the total outstanding balance of DLB and DLS was stable at KRW27 trillion as at the end of March, compared with a quarter ago.

By asset class, interest rates kept a safe lead by linking to DLB and DLS worth KRW3.1 trillion representing a market of 58.8%, down 16.2% QoQ. Credit used in products valued at KRW1.4 trillion, saw a 33.4% rebound from its yearly low a quarter ago.

Indices resurfaced as underlying assets in Q1 21 linking to two products at KRW 500m after disappearing in the third quarter of 2020. The volume of fund/ETF/ETN-linked products remains stable at KRW310m compared to a quarter ago. They were not seen in Q2 and Q3 20.

The repayment amount of DLS and DLB amounted to KRW5.6 trillion in Q1 21, down 19.9% QoQ or 37.4% YoY. Approximately 58.1% of this was redeemed early, higher than the 52% seen a quarter ago. An additional KRW2.2 trillion, or 39.3% of the repayment, was collected upon full maturity, and the remaining of KRW143.6 billion was interim redemption.

Hana Financial Investment was the most active issuer of DLB and DLS in Q1 21 collecting KRW677.1 billion through public channels and KRW790 billion through private channels, a market share of 13.5%.

Trailing closely behind are Kyobo Securities (13.3%), Samsung Securities (12.8%), NH Investment & Securities (11.5%) and Hanwha Investment & Securities (11.5%). An additional 13 issuers together represent the remaining market share of 37.4%. 

Click here to view the report from the Financial Services Commission (in Korean).