Korean retail market boosted by influx of institutional money

The Korean equity derivatives structured products market gets the attention of institutional investors

 

Institutional investors are moving into the Korean equity derivatives structured products market, which was previously the sole preserve of retail investors. 

“We are seeing some institutional investors, who previously relied heavily on fixed-income products, now altering their portfolio stance and looking more towards equity products for yield enhancement,” says Harold Moon, head of equity derivatives at Nomura in Seoul. “Since the equity portion in institutional investors’ portfolios was traditionally small (2–3% in the case of big insurance companies), any reallocation in favour of equity products is significant,” says Moon. 

“We expect that retail investors’ interest in the equity-linked warrants (ELW) market will continue into 2011, and the market will develop further with new Financial Supervisory Service regulations for those investors’ protection,” says Moon.  

With claims to be the third-largest warrant issuer in Korea, Nomura is due to launch the first electronic Korean won-based warrant on Hong Kong Exchanges and Clearing at the end of the first quarter. 

“It will be the first foreign warrant with a Korean company as its underlying on the Hong Kong Exchange,” says Moon. 

“Our warrants team is preparing to issue Samsung Electronics warrants, which will be listed in Hong Kong. We expect they will be of interest to high-net-worth individuals in Hong Kong and mainland China, in the same way that Google and Apple warrants were,” he says.