Nonghyup Bank suspends ELS sales… Spread of repercussions for Hong Kong H Index – Deal site

[딜사이트 이보라 기자] As large-scale losses were expected from equity-linked securities (ELS) issued with the Hong Kong H Index as the underlying asset, NH Nonghyup Bank decided to stop selling ELS. This is the first time in the banking sector to suspend ELS sales.

According to the financial sector on the 29th, Nonghyup Bank decided to stop selling ELS, which can cause principal loss, from the 28th and sell only stock price-linked derivative bonds (ELB) that can guarantee principal. This is interpreted as a measure to protect customer assets. A Nonghyup Bank official said, “As concerns emerged about principal loss in ELS products, we decided through an internal meeting to stop selling products with non-guaranteed principal.”

ELS is a derivative product whose profit structure is determined by the stock index used as the underlying asset. The H index rose to the 12,000 mark in 2021, but has now fallen to half of the 6,000 mark. The index must rise to at least 7,000 by next year to recover the principal, but it is expected that it will not be easy.

Shinhan Bank and Woori Bank stopped selling ELS only for products linked to the Hong Kong H Index since last year. A Shinhan Bank official said, “We have stopped selling ELS linked to the Hong Kong H Index since November of last year.” An official from Woori Bank also said, “Since December of last year, the H index has been excluded from the underlying assets of ELS and ELT (Equity Linked Trust).”

Other banks are also closely monitoring the situation and considering whether to suspend operations. A Hana Bank official said, “We are monitoring the market situation and considering whether to stop selling related products.” A Kookmin Bank official also said, “We are considering discontinuing ELS sales.”

According to data submitted by People Power Party lawmaker Han-Hong Yoon’s office from the Financial Supervisory Service, the balance of Hong Kong H-index ELS issued by banks as of the end of August was 15.8 trillion won. Of these, 8.3 trillion won will mature in the first half of next year. Looking at each bank, Kookmin Bank accounts for more than half at 4.7726 trillion won. This is followed by ▲Nonghyup Bank 1.4833 trillion won, ▲Shinhan Bank 1.3766 trillion KRW, ▲Hana Bank 752.6 billion KRW, and ▲Woori Bank 24.9 billion KRW.