[Alpha Biz=(Chicago) Reporter Kim Jisun] The loss of more than KRW 100 billion in principal was confirmed in just five days in the Hong Kong H Index (Hang Seng China Business Index) basic equity-linked securities (ELS) products sold by major commercial banks.

According to the banking sector on the 15th, the Hong Kong H Index-based ELS products sold at the top five banks (KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup Bank) lost 106.7 billion won by the 12th of this year.

Specifically, as the first loss was confirmed from the 8th, the loss exceeded 100 billion won in just five days until the 12th. The principal amount due during the period was about 210.5 billion won, and the total loss rate was 50.7%, as only 103.8 billion won was repaid.

In addition to the loss of 8.2 billion won confirmed in the second half of last year, the loss of principal related to the Hong Kong H Index ELS amounted to 114.9 billion won in six months at the five major banks alone. The ELS is linked to the index used as the underlying asset, which usually evaluates the price of the underlying asset every six months and gives an early repayment opportunity, and a loss of principal if the price of the underlying asset at maturity falls below a certain standard.

The reason for a series of principal losses in the ELS based on the Hong Kong H Index is that the Hong Kong H index has been halved since 2021 when the product was sold. The Hong Kong H Index is an index that selects 50 of the Chinese companies listed on the Hong Kong Stock Exchange and is characterized by high volatility. The Hong Kong H index exceeded the 12,000 mark in February 2021, but it has fallen to 8,000 units at the end of that year and is currently sideways from 5,000 units. At the end of October last year, the 5,000-point line collapsed.

According to data from the Financial Supervisory Service, as of Nov. 15 last year, the total sales balance of ELSs based on the Hong Kong H index stood at KRW 19.3 trillion, with KRW 15.4 trillion, or 79.6% of the total balance, due this year. On a quarterly basis, maturity is concentrated in the first half of this year (KRW 10.2 trillion), with KRW 3.9 trillion in the first quarter of this year and KRW 6.3 trillion in the second quarter. In the first half of the year, if the current level of the Hong Kong H index continues, the loss of principal of the Hong Kong H Index-related ELS sold by the top five banks may exceed KRW 5 trillion.

The financial authorities plan to conduct on-site inspections of 12 major ELS vendors linked to the Hong Kong H Index (KB Kookmin, Shinhan, Hana, NH Nonghyup, SC First Bank, Korea Investment, Mirae Asset, Samsung, KB, NH, Kiwoom and Shinhan Investment & Securities) and find out whether they are incomplete.

 

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