Korea’s ELS issuance down 31% on year in 2020

Equity-linked securities (ELS) issuance in South Korea fell 31 percent in 2020 mainly due to the weak demand for ELS products tracking foreign stock indices, the Korea Securities Depository data showed Friday.

The total ELS issuance came at 69 trillion won ($62.6 billion) in 2020, down 30.9 percent from the previous year. The total figure includes equity-linked bonds.

An ELS is a hybrid debt instrument designed to pay returns based on the performance of an underlying equity such as stock index and a basket of stocks.

The issuance of ELS products tracking stock indices outside Korea fell sharply. The products linked to S&P 500 shrank by 36.6 trillion won, Euro Stoxx 50 by 31.1 trillion won and Hong Kong’s HSCEI by 19.08 trillion won.

Issues of Kospi 200-linked products, however, rose 14.6 percent over the same period to 28.1 trillion won thanks to Korean stocks’ outperformance.

A total 57.8 trillion won worth of ELS was issued for public placement, accounting for 83.9 percent of the entire issues. Private placement amounted to 11.1 trillion won.

The largest ELS issuer was Mirae Asset Daewoo with 11.9 trillion won, followed by KB Securities with 8.3 trillion won and Korea Investment & Securities 6.9 trillion won. NH Investment & Securities issued 6.8 trillion won and Samsung Securities 6.8 trillion won.

The redemption in 2020 fell 23.0 percent on year to 78.5 trillion won. Early redemption was 51.8 trillion won, while 24.3 trillion won was collected upon reaching full maturity. Interim redemption was 2.3 trillion won.

As of end-December, the outstanding amount of ELS issues stood at 61.4 trillion won, down 13.6 percent from a year earlier.

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