Société Générale (SG) has been recognised as the “Best House, Asia Pacific” for the sixth time, as well as “Best House, Japan” and “Best House, Asian Equities” at the SRP Asia Pacific Awards 2024.
According to the French bank, 2023 was a year filled with the narrative of contrasts in the equity market with a strong rally in the US and Japan and underperformance in China. However, this opened new opportunities to navigate the equity markets and leverage the structured product market in Asia Pacific.
“[The view] certainly can change every quarter... but for now we're seeing the overall trends of Q1 quite stable - JJ Yoon
With higher interest rates, the overarching theme over the past year has been that product structures have gotten “simpler and more vanilla in nature,” according to Jung-Jin Yoon (JJ Yoon), head of global markets sales, Asia Pacific at Société Générale.
“There are growing opportunities for fixed income products,” JJ Yoon told SRP in an interview.
JJ Yoon also noted that plenty of investors are still sitting on the fence to see the central banks’ next moves with principal protected structures still being favoured by retail investors.
While fixed income-focused capped floored floaters and curve-linked offerings are making a comeback, cross-asset exposure for yield enhancement products remains on demand in the market, according to him.
“In the past, a lot of structures were dominantly equity driven… but [asset] correlation remains very high within just the equity space hence there is more value to extract by focusing on the hybrid space between different asset classes,” he said.
In Singapore, the bank’s 100% minimum redemption hybrid callable products, which incorporate equities with either a rates or FX component, have been well received over the past year.
According to the senior executive, in the first half of the year, the bank saw its structured products traded notional in Asia ex-Japan soar around 50% year-on-year. Around 80% of volumes stemmed from exposure to US equities whereas the remaining 20% came from Hong Kong underlyings.
“From an investment perspective, we've seen that some investors were a bit anxious about interest rates coming off sooner than expected hence seeing more positioning on longer investment horizons," he said. “[The view] certainly can change every quarter... but for now we're seeing the overall trends of Q1 quite stable as well as the introduction of certain products where investors are set to benefit further if there is a decline in rates."
“For directional investors who are more focused on the short-term horizon, I think they're already in the market. For investors who are more conservative, we still see plenty of investments staying idle for now waiting to see how the market plays out," he said.
Japan and beyond
In Japan, market participants have been grappling with regulatory changes introduced in July 2023 on the distribution of structured Uridashi, or publicly distributed non-fully principal-protected structured notes.
This, however, shifted investors' attention and prompted other opportunities, such as quantitative investment strategies (QIS) and structured funds, according to JJ Yoon.
Mass retail has been one of SocGen Asia’s core focuses for the past two years - JJ Yoon
Some of these funds are principal-protected and have a tenor of four to five years that pay a fixed coupon every year with an equity option at maturity. They also pay the upside of their underlying index strategy. Most of the funds are denominated in JPY.
In the retirement space, fixed index annuities (FIA) and other insurance-linked offerings have also been on the rise in Japan. According to JJ Yoon, the French bank launched an FIA linked to a multi-asset strategy using a quantitative allocation model based on artificial intelligence (AI).
In other markets in Asia Pacific, the SG also made product diversification within mass retail a key focus over the past year.
On the Singapore Exchange, SG listed Asia's first-ever structured certificates last August establishing its leading position in the listed structured products market; in Taiwan, the bank rolled out an insurance-linked Formosa offering; and in Hong Kong SAR, the issuer's footprint continued to grow with the expansion into the equity-linked investment (ELI) retail program.
“Mass retail has been one of SocGen Asia’s core focuses for the past two years,” he said. “It will remain the case for the coming years as we see plenty of growth opportunities where [our] expertise can clearly bring value to our clients.”
JJ Yoon remains positive for the remainder of 2024 despite potential changes in the interest rates environment and geopolitical events, noting an increasing interest from retail investors in the Japan and India equity stories for which structured products will have a part to play.
“[The increasing inquires] don’t necessarily translate into more volumes but we usually do see some pickup after this level of interest – that’s something that we're keeping a close eye on,” he concluded.
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