SRP breaks down the live Nikkei 225-linked products with knock-in barrier put following last week's stock markets shakeout, while AI themes continue to thrive.

A wild week for the Japanese equity market has seen investors in structured products looking at various market exposures to the autocallable structure featuring the country's benchmark Nikkei 225 index.

Out of 3,695 live Nikkei 225-linked products with a knock-in barrier put stemming from 18 different jurisdictions on SRP’s database, only six investment certificates and one structured note – all issued in Switzerland – have breached the knock-in barrier after the spot price tumbled on Monday.

The impact on the 33 live Japan-issued publicly distributed-autocallables has remained within the conditional protection limits as the average safe cushion of these products shrank by only 1.1%, according to SRP data analysis. The reason? Most of those products have locked in advantageous entry levels preceding the Japanese stocks' impressive rally in 2023 and 2024.

Artificial intelligence (AI) continued to be a popular theme. IVM Markets, a US fintech offering an AI-powered idea generation software-as-a-Service (SaaS) for structured products, raised US$3.4 million from venture capital investors in a new funding round led by SixThirty Ventures.

The round also includes the participation of Altair Capital, Blackwood Ventures, Begin Capital alongside Geekdomfund and Vibranium VC and several other existing investors. The company will use the capital raised to grow its client base and develop new AI based features including a new AI-powered dashboard, the company's CEO and cofounder Volodymyr Gubskyi told SRP.

According to Gubskyi, the structured products market has evolved from a calendar issuance to a more customised approach. However, “many market players still continue to trade the same products linked to well-known indexes like SPX/SX5E/UKX or companies like Nestlé/ Roche/ Novartis or Apple/ Google/ Amazon, without sufficient research on allocation, potential upside/downside, and maximising alpha”.

3AI, another AI company based in the UK, has partnered with Gather Investments, a digital wealth app targeted at investment professionals, to develop a new structured product. It involves the launch of a new actively managed certificate (AMC) in partnership with Leonteq and 1OAK. Under the terms of the partnership, 3AI will licence the strategy to 1OAK who will manage and execute the portfolio of the certificate and make it available via the Gather app for individual investors.

Investors continued to embrace a flurry of earnings releases. Société Générale’s global banking and investor solutions business, which offers tailor-made solutions in equity derivatives, structured finance, and ESG, registered revenues of €2.6 billion, a 10% increase on Q2 2023. The French bank’s fixed income and currencies (FIC) business increased three percent year-on-year (YoY) to €571m (US$623m), notably due to supportive client activity in the investment solutions business which offset the contraction in flow and hedging activities in a context of tighter spreads in rates and low volatility on foreign exchange rates.

Vontobel reported profit before tax of CHF173.3m (US$200m) for H1 2024, up 12% YoY. Within private clients, the operating income from structured solutions rose to CHF152.7m in the first half of the year, up 26% compared to the same period last year (H1 2023: CHF121.3m).

In the US annuity market, preliminary results from Limra’s US Individual Annuity Sales Survey, which represents 92% of the total US annuity market, showed that total US annuity sales increased to US$215.2 billion in the first half of 2024, up 19% YoY. In Q2, total annuity sales rose 25% YoY to US$108.5 billion – the second highest quarterly total ever recorded. Fixed indexed annuity (FIA) sales had another record quarter with US$29.7 billion, 17% higher YoY. Year-to-date, FIA sales were US$58.3 billion, up 20% YoY.

In Asia Pacific, CGS International Securities – the overseas arm of Chinese state-owned brokerage and investment banking giant China Galaxy Securities – is preparing to start issuing structured products by the end of the year in its home market of Singapore, after being an active third-party distributor locally since early 2020, Carlos Lim, the group head of securities and leveraged products at CGS International, told SRP in an interview.

The Singapore-headquartered investment house’s overall structured product traded notional is expected to increase by five to 10% YoY in 2024, according to Lim. Currently, Thailand and Malaysia make up roughly half and half of the firm’s structured product market share by sales volume.

Image: Andov/Adobe Stock.


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