Dealers reassess Korea ELS market as equity risk builds up

South Korea

Dealers' stockpile of long vega in the Korean equity-linked securities (ELS) market is causing a pullback on some underlyings and leading to a diversification into the Euro Stoxx 50 and S&P indexes.

The Korean ELS market is the second largest in Asia after Japan and while investors in the latter enjoyed a resurgent equity market in 2013, the same cannot be said for investors with exposure to Korea where markets have remained sluggish.

More than 80% of the ELS market is autocallable and, among

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