Revival of ELS Investment in South Korea Amid Global Stock Market Boom
The ELS (Equity-Linked Securities) investment market in South Korea is experiencing a revival this year, following a period of stagnation due to losses associated with the Hong Kong H-index linked securities. As the global stock markets continue to thrive, more investors are optimistic about the potential for returns in the range of 10%.
According to the Korea Securities Depository, as of the 25th of this month, the issuance of domestic ELS has reached 16.97 trillion won this year, surpassing the total issuance of last year, which was 16.74 trillion won. Recently, there has been an increase in instances where investors have recovered their principal and interest before the maturity date by meeting early redemption conditions. The early redemption amount for ELS this year has reached 14.52 trillion won, with annualized returns for these investors ranging from 6% to 18%.
ELS are derivative securities that use major stock indices or individual stocks as underlying assets. They are designed to pay returns if the price of the underlying asset remains above a certain level. The expected returns generally range from 5% to 10%. However, while there is a ceiling on returns if the price of the underlying asset rises significantly, there is also a risk of total principal loss if the assets price falls into a loss zone (knock-in).
The ongoing bull market in the stock market has reignited interest in ELS investments. The KOSPI index, for instance, reached a record high of 3,941.59 on the 24th of this month, marking a remarkable increase of 64.2% this year alone. Similarly, the U.S. S&P 500 and NASDAQ indices have consistently broken their own records, maintaining an upward trend.
In the ELS market, there is a noticeable increase in products betting on the domestic stock market, which has been particularly robust. A total of 3,765 ELS linked to the KOSPI 200 index have been issued so far this year, marking a 13.3% increase compared to the same period last year when 3,321 were issued. Additionally, ELS products linked to other foreign indices, such as the U.S. S&P 500, Euro Stoxx 50, Nikkei 225, and the H-index, are also being issued.
According to the Korea Securities Depository, as of the 25th of this month, the issuance of domestic ELS has reached 16.97 trillion won this year, surpassing the total issuance of last year, which was 16.74 trillion won. Recently, there has been an increase in instances where investors have recovered their principal and interest before the maturity date by meeting early redemption conditions. The early redemption amount for ELS this year has reached 14.52 trillion won, with annualized returns for these investors ranging from 6% to 18%.
ELS are derivative securities that use major stock indices or individual stocks as underlying assets. They are designed to pay returns if the price of the underlying asset remains above a certain level. The expected returns generally range from 5% to 10%. However, while there is a ceiling on returns if the price of the underlying asset rises significantly, there is also a risk of total principal loss if the assets price falls into a loss zone (knock-in).
The ongoing bull market in the stock market has reignited interest in ELS investments. The KOSPI index, for instance, reached a record high of 3,941.59 on the 24th of this month, marking a remarkable increase of 64.2% this year alone. Similarly, the U.S. S&P 500 and NASDAQ indices have consistently broken their own records, maintaining an upward trend.
In the ELS market, there is a noticeable increase in products betting on the domestic stock market, which has been particularly robust. A total of 3,765 ELS linked to the KOSPI 200 index have been issued so far this year, marking a 13.3% increase compared to the same period last year when 3,321 were issued. Additionally, ELS products linked to other foreign indices, such as the U.S. S&P 500, Euro Stoxx 50, Nikkei 225, and the H-index, are also being issued.
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