After a tumultuous year, the global structured product markets end the year on a relatively sunny tone (for most of them).

Let’s start with Asia Pacific, specifically Hong Kong SAR, where the regulator has released its latest report on non-listed structured products for public offering sold in the country during the last quarter. The Securities Financial Commission (SFC) has authorised 73 unlisted structured products for public offering in Hong Kong SAR in its second quarter ended on 30 September, during which it posted an income of HK$206.1m (US$26.5m), a bounce from a loss of HK$111.1m year-on-year.

A survey released by SFC in August shows that the asset and wealth management business in Hong Kong SAR posted strong growth despite the challenges facing global markets in 2019. Assets under management increased by 20% year-on-year to HK$28.8 trillion and net fund inflows of HK$1.7 trillion were recorded during the same period.

When it came to trading on the primary market, big clients wanted to be opportunistic - Illka Vakevainen

Over in the US, the structured products market continues to be one of the fastest growing markets across the world and has seen an increase in issuance (four percent) and sales (11.5%) year-on-year. SRP data shows that public offering products linked to single underlyings bought by retail investors maturing over the last 18 months have delivered a 6.6% average return for products linked to single underlyings and 6.5% for products including baskets – this is based on 27,573 maturing products of which 12,229 have performance. Even the US fixed index annuities (FIA) market has seen a rebound over the last three months despite a 27% fall year-on-year. FIA sales have recovered by 10%, totalling US$13.2 billion while registered index-linked annuity (Rila) sales soared by 29% to US$6.3 billion from the previous quarter of 2020, according to the Secure Retirement Institute.

In the Nordics, a region which was the subject of an SRP webinar last week, it’s been a roller-coaster of a year, according to said Illka Vakevainen, director, head of capital markets, Taaleri Group. He noticed a shift in client demand when the pandemic hit the markets, and an increase in opportunistic trading activity. “When it came to trading on the primary market, big clients wanted to be opportunistic, which was extremely difficult in March-April when liquidity was scarce in any market,” he added.

Four panellists in wealth management from major Chinese banks discussed the application of quantitative investments strategy (QIS) indices for structured notes in China since their debut last year at SRP China at the start of December.

The deployment of QIS indices has a short history in China. Song Fei, head of global markets at Citic Wealth, a subsidiary of China Citic Bank, said his team and Citic Securities collaborated on the launch of the first ever QIS index, Global Multi-asset Momentum Trend (MAXT) last May, in China.

PSBC Wealth Management, a subsidiary of Postal Saving Bank of China, is also at the forefront of developments in the QIS space. The company launched its first momentum-orientated QIS index which comprises 11 global assets in February and launched in August the first note using this underlying after being ‘motivated’ by the progress made by its domestic and overseas counterparts, according to Jing Qiang, head of investment portfolio strategy at PSBC Wealth Management.    

In less positive news, China’s oldest state-owned policy lender has been fined CNY50.5m (US$7.7m) for breaking several laws in its loss-making structured products tied to crude oil, known as Crude Oil Treasure or Yuanyou Bao. The notes, which were marketed by Bank of China (BOC), generated losses of over CNY9 billion from more than 6,000 retail investors, when May contracts for West Texas Intermediate (WTI) crude oil plummeted to a negative price (-US$37.63) on 20 April for the first time since the contracts were listed 37 years ago.   

Finally, Credit Suisse has launched its first ESG structured notes which incorporate an impact-aligned use of proceeds and an exposure to the MSCI ESG Rating Select Indices on either US or eurozone equities. The inaugural notes have been sold to Credit Suisse’s private banking clients in Europe. The MSCI ESG Rating Select Indexes are constructed by selecting a target number of constituents from the parent index, as ranked based on their free float market capitalisation - only securities which trade in the target currency are eligible for selection.

Image: Flickr