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Korean retail traders shift to structured notes with up to 50% coupons
July sales of equity-linked securities topped a three-year high at 3.5 trillion won, led by notes tied to Samsung Electronics and SK Hynix.
South Korea’s retail investors have increased demand for complex equity-linked securities after a historic stock selloff, LiveMint Markets reports. The renewed interest centers on equity-linked products offering annualized coupons in the 40% to 50% range, with retail flows led by notes tied to Samsung Electronics Co. and SK Hynix Inc.
According to LiveMint Markets, sales rose to more than a three-year high in July, reaching 3.5 trillion won, the most since April 2023, based on data from the Korea Financial Investment Association. The surge also comes as regulators moved to curb frenzied retail demand for single-stock leveraged exchange-traded funds, which were blamed for amplifying swings during last month’s Kospi plunge.
The outlet notes that equity-linked securities can provide coupon payments as long as the underlying stocks or indexes remain within preset ranges, but they can involve substantial downside risk during sharp market moves. Losses on China-linked notes were cited as an example of how quickly outcomes can deteriorate.
LiveMint Markets also describes recent issuance terms, including a Meritz Securities note tied to Samsung and SK Hynix with an annualized yield of 43.4%, where investors can lose principal if either stock falls 70% during the note’s life. It adds that Kiwoom Securities has issued an ELS tied to SK Hynix and LG Electronics with coupons of up to 50%, while disclosing potential losses of 30% to 100% if payout conditions are not met.
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