Check out our website to read of coverage of our most recent conference and awards, the SRP 2022 Americas event. The news this week also sees Asia Pacific markets continue growing and innovating.

Maybank, the largest Malaysian bank, has begun issuing structured warrants over companies listed on the Hong Kong Stock Exchange, as market sales and volumes increase year on year. It launched a batch of 16 long/short structured warrants on Bursa Malaysia, tracking eight Hong Kong-listed stocks. 

With a concentration in the automotive and e-commerce sectors, the eight underliers include Alibaba, JD.com, Geely, Tencent, Ganfeng Lithium, Meituan, BYD and Netease traded on the Hong Kong Stock Exchanges and Clearings (HKEX). Each of them is available through a call and put structured warrant. Neteast, China’s second largest online game company by revenue, is a new underlier for the Malaysian structured warrant market.

Inflation control seems to be the primary motivator for Fed policymakers - Yugi Lee, Blackhorn

Hong Kong SAR-based Blackhorn Wealth Management has reached US$1 billion in AuM. Founder Yugi Lee told SRP that year-to-date, weekly traded volume is from US$12m to US$15m, around 40% of which comes from structured products – half leveraged and half non-leveraged.

“We use structured products as short-term tactical tools…In H1 2022, one popular trade was put warrants with a gearing up to 20x with maximum loss capped at the option premium. The warrants were linked to the Hang Seng Index or S&P 500 and act as a hedging tool. Inflation control seems to be the primary motivator for Fed policymakers. We will continue to keep the hedging strategy,” she said.

Over in Europe, turnover in investment and leverage products on reporting European financial markets reached €32 billion in the second quarter of 2022 – down 10% year-on-year (YoY) and 29% compared to the previous quarter, according to the latest figures sourced by the European Structured Investment Products Association (Eusipa).

Investment products such as capital-protected, yield enhancement and participation products, recorded a turnover of €9.3 billion – down 42% YoY and 31% quarter-on-quarter (QoQ).

Turnover in leverage products (warrants, knock-out warrants, and constant leverage certificates) reached €22 billion between 1 April and 30 June, 72% of total turnover. Turnover in leverage products increased by 15% YoY but decreased by 29% from Q1 2022.

At the SRP Americas 2022 conference last week, delegates were told that markets have performed sluggishly since the beginning of the year but sales and issuance in the Americas are up compared to 2021.

Rates and volatility inform everything that structured products issuers do and this year has been one of rather rapid change, which requires people to innovate on the fly and figure out how they want to deploy structured products within their portfolios, according to Brandon Igyarto, managing director, J.P. Morgan.

“With the market being down 20% that's really where a lot of our conversations start,” he said.  “We are not changing our pathways, but we're reassessing based on the opportunities that are currently available. Over the last two years the trend was heavily towards income paying products because that's where the real need was, but with the markets being down people recognise there's an entry point opportunity, and potentially they also have more discount through the yield curve which can help to provide better optics longer term.”

On the index side of things, the UBS Balanced Commodity Risk Premia VT5 Portfolio has delivered the largest AuM among UBS Global Markets’ QIS offerings. The index, which aims to harvest stable absolute returns, is one of the best-selling QIS products sold to private banks in Hong Kong SAR and Singapore year-to-date, according to a sales deck seen by SRP.

The clients invested in this strategy include mutual funds, hedge funds, family offices, corporates and financial institutions besides private banks. Following the most recent launch of dynamic carry – one of the five strategies along with short spread, scarcity, skewness and anti-crowding – in March 2022, the alpha QIS has been offered through various wrappers including structured notes with capital protection and warrants.

Some of the warrants require a minimum ticket of US$1m notional amount with tenor of one year, two year or three years available, SRP has learnt.

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