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[Alpha Biz=(Chicago) Reporter Kim Jisun] More than KRW 300 billion in principal losses have been confirmed this year in Hong Kong H Index ELS products sold by the banking sector in 2021. Analysts say that if the H index remains at the 5,300-point level as it is now, the loss of principal in the first half of this year could rise to between 5 trillion won and 6 trillion won.
According to the banking sector on the 29th, the H index ELS maturity losses sold by four banks, including Kookmin, Shinhan, Hana and Nonghyup, amounted to 312.1 billion won by the 26th. The average fixed loss rate of 588.8 billion won worth of products with a three-year maturity reached 53%.
The ELS based on the H index usually causes losses as much as the decline rate if the H index falls below 65-70% from the time of subscription when it expires three years later. The H index exceeded 12,000 units in February 2021, but recently fell to 5,300 units in the wake of the U.S.-China conflict and the sluggish Chinese economy.
According to the Financial Supervisory Service, the total sales balance of the H index ELS reached 19.3 trillion won as of November last year. Of the total, 79.8 percent, or 15.4 trillion won, will expire this year. It is worth 10.2 trillion won in the first half alone, including 3.9 trillion won in the first quarter (January to March) and 6.3 trillion won in the second quarter (April to June). If the loss rate expands to 60%, the amount of principal loss of H-index ELS products is expected to exceed 6 trillion won in the first half alone.
The banking sector will partially compensate for losses if the seller's negligence, such as incomplete sales, is recognized. During the 2019 Derivative Linked Fund (DLF) and the 2021 Lime Fund crisis, the FSS Dispute Settlement Committee recommended financial firms to compensate 40-80% of the losses.
The financial authorities, which are conducting on-site inspections of major ELS vendors in the H index, plan to come up with measures by March.
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
