Best in Malaysia - CIMB

Since CIMB scooped this award last year, the Malaysian market has become tougher for all involved. Difficult conditions in global markets have forced distributors to find new ways to provide returns, while the increasing number of participants has made competition for business more intense.

Against this challenging backdrop, CIMB has managed to keep both its sales volume and market share buoyant. To maintain its market share, which stands at around one-third, the bank would have to increase sales volumes by 40% in 2008 to around 4.5 billion ringgit (US$1.3 billion), which Chu Kok Wei, vice-president of derivatives and structured products at the bank, is confident of achieving. Global stock market volatility has created the perfect operating environment for capital-protected products, as investors' desire for upside performance is tempered with a fear of capital loss, says Chu.

Subsequently, the bank's major offerings this year have incorporated some form of capital protection in dynamic structures that can adapt to less favourable market conditions. In the first quarter, CIMB launched the Dynamic Market Rider NID-i product, achieving sales of 693 million ringgit (US$207 million) on the investment. The capital-guaranteed product was linked to the CIMB Millennium Excess Return Index, which applies a long/short trading strategy to global equity, currency, real estate and commodities. Aside from offering returns in either bull or bear markets, the product was also sharia compliant. "Since August 2007, when we saw the sub-prime bubble bursting, we realised that directional investments might not be a good idea," says Chu.

Another offshoot of the crisis was the opportunity to structure around battered US financial stocks. In December 2007, CIMB exploited the opening by launching the Rebound FRNID (Floating Rate Negotiable Instrument of Deposit), which made it from concept to its 362 branches in just three days. The capital-guaranteed product was a two, three or five-year investment that gave exposure to the equity of Merrill Lynch, Citi, UBS and Morgan Stanley.

Size gives the bank a very competitive edge, as it has the potential to embark on investor initiatives that would be too expensive for smaller operations. The most notable has been its 'cash-out' campaign, which raised awareness of the secondary market. The most common complaints from investors about structured products are frequently a lack of liquidity and transparency, says Chu. The 'cash-out any time' campaign was designed to tackle that perception.

"The day after issue, we immediately make a secondary market available for the full duration of the product," explains Chu. Every six months, investors are sent a Structured Investment Performance Report analysing the product they have purchased, as the bank encourages them to take a more active approach to their investments. "We do not believe that customers should just buy these products and forget about them," he says. "Investment conditions change and opportunities will present themselves." As a result of the campaign, investors are more comfortable buying longer-tenor products as they are confident enough about liquidity to exploit the more attractive terms available. Chu says that 80% of investors who bought the Dynamic Market Rider Product opted for the five-year over the three-year version.

The Dynamic Market Rider was accompanied in its Islamic investment range by a structured commodities fund, which offered dynamic exposure to the asset class and represented a total issuance of 507 million ringgit (US$151 million). The quality of its sharia offering is readily apparent in the popularity of these products outside the Islamic investor contingent: the bank was surprised to find that many churches in Malaysia purchased the product, attracted by its ethical connotations. "Any structure needs to be as economically viable and efficient as possible compared to the conventional counterpart - the customer won't accept a huge slippage just because it is sharia compliant," says Chu.

Thinking in depth about its investor audience has put CIMB ahead of its competitors in this space. One distributor in particular was impressed by the made-to-measure service that the bank offered. "A product marketed to the retail market or the layman can be quite generic, and 'take it or leave it'. But when CIMB markets to institutions like us, they go out of their way to tailor it for us," says Amar Ramachandran, head of investment at Credit Guarantee Corp Malaysia, highlighting the advantages of the dedicated team at the bank. "In terms of product development, I think they are a pioneer among local banks that have ventured into the structured products market," he says.