Investors Seek Alternatives to Low Bank Interest Rates Amid Stock Market Rally
As interest rate cuts become more pronounced, the stock market continues to thrive, prompting active searches for alternative investment options to replace the meager returns on bank deposits. Even conservative investors, who prioritize principal preservation, are not exempt from this trend. Although they may not directly invest in individual stocks or exchange-traded funds (ETFs), they are turning to equity-linked products that allow them to benefit from the stock market boom.
The growing sales of equity-linked bonds (ELBs) and index-linked deposits (ELDs), which guarantee the principal while offering higher returns than standard deposit interest rates, highlight this shift in investment strategy. According to the Korea Securities Depository, the total issuance of ELBs has reached 19.4982 trillion KRW this year as of the 25th, marking a 19.4% increase compared to the same period last year (16.33 trillion KRW). The five major banks — KB, Shinhan, Hana, Woori, and NongHyup — reported sales of 5.2684 trillion KRW as of the 23rd, surpassing last year’s total sales figure of 4.4252 trillion KRW. Similarly, the sales of ELDs from these banks (8.8341 trillion KRW) have already exceeded the previous year’s total (7.3733 trillion KRW).
Both ELBs and ELDs guarantee the principal while their returns are dependent on the performance of underlying assets. Most of the investment is allocated to safe assets such as government bonds, with a portion invested in riskier assets to seek additional returns. The return on ELBs varies based on key indexes like the KOSPI 200 or S&P 500, or the prices of individual stocks such as Samsung Electronics and Nvidia. For instance, Kiwoom Securities recently launched Kiwoom ELB No. 980 offers an interest rate of 5.01% if the price of Samsung Electronics more than doubles by the maturity date, otherwise, it provides an interest rate of 5%.
On the other hand, ELDs are designed to yield returns linked to specific indexes. For example, Hana Banks Index Plus Regular Deposit 25-20 (high yield pursuit type) is tied to the performance of the KOSPI 200 index during the investment period. This trend reflects the growing interest among investors for products that offer higher returns while maintaining a level of security in their investments.
The growing sales of equity-linked bonds (ELBs) and index-linked deposits (ELDs), which guarantee the principal while offering higher returns than standard deposit interest rates, highlight this shift in investment strategy. According to the Korea Securities Depository, the total issuance of ELBs has reached 19.4982 trillion KRW this year as of the 25th, marking a 19.4% increase compared to the same period last year (16.33 trillion KRW). The five major banks — KB, Shinhan, Hana, Woori, and NongHyup — reported sales of 5.2684 trillion KRW as of the 23rd, surpassing last year’s total sales figure of 4.4252 trillion KRW. Similarly, the sales of ELDs from these banks (8.8341 trillion KRW) have already exceeded the previous year’s total (7.3733 trillion KRW).
Both ELBs and ELDs guarantee the principal while their returns are dependent on the performance of underlying assets. Most of the investment is allocated to safe assets such as government bonds, with a portion invested in riskier assets to seek additional returns. The return on ELBs varies based on key indexes like the KOSPI 200 or S&P 500, or the prices of individual stocks such as Samsung Electronics and Nvidia. For instance, Kiwoom Securities recently launched Kiwoom ELB No. 980 offers an interest rate of 5.01% if the price of Samsung Electronics more than doubles by the maturity date, otherwise, it provides an interest rate of 5%.
On the other hand, ELDs are designed to yield returns linked to specific indexes. For example, Hana Banks Index Plus Regular Deposit 25-20 (high yield pursuit type) is tied to the performance of the KOSPI 200 index during the investment period. This trend reflects the growing interest among investors for products that offer higher returns while maintaining a level of security in their investments.
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