Structured - BNP Paribas

More documents

Recommendations

Info

ContentsEurope Belgium 4 Luxembourg 5 France 6 Netherlands 8 Scandinavia 9 Germany 10 Austria 11 Central & Eastern Europe 12 Ireland 13 United Kingdom 14 Italy 16 Spain 17 Portugal 18 Greece 19 Switzerland 20North America 21Asia Asia ex-Japan 23 Hong Kong 24 Singapore, Taiwan, Korea 25 Japan 26Conclusion 28Disclaimer 29Glossary 3025201510141210850SRPs: Overview &Innovations in 2004General OverviewVolumesIn 2004, savings invested in European structured productsamounted to about the same as in 2003. If we include the 6main European markets (Belgium, France, Germany, Italy, Spainand the UK), issuance came out slightly above e80bn in 2004.Austria2003 2004Germany2003 2004BelgiumFranceIrelandItalyTotal Issuance in billion EurosNetherlandsPortugalSpainUKScandinaviaSource: BNP ParibasThe situation is different in Asia, with significant issuanceincreases seen in several countries: +30% in Hong Kong, +250%in Taiwan, etc. However, total market size including Japan is lessthan half that of the European market, amounting to $43bn in2004Total Issuance in billion US Dollars6420Hong Kong Taiwan Singapore Korea JapanSource: BNP ParibasAfter a sharp rise in volume issuances over the period 2001-2003,the North American market has opted for a pause in 2004:issuances actually totalled $12bn versus $15bn the previous year.2005 should nevertheless reverse the trend as the 1st half of theyear proved to be very active.2Belgium Luxembourg France Netherlands Denmark Sweden Finland Norway Germany Austria Poland Hungary Czech Republic
2004: The Structuring DilemmaThe continued fall in interest rates in Japan, Switzerland andthe Euro zone in 2004 made it difficult for dealers to structurecapital guaranteed products, in particular in an attempt tomeet investor demand for regular/guaranteed coupons andshort-term maturities. The fall in volatility levels in the 2nd halfof the year made things even more problematic, giving issuerslittle choice but to expose their clients to dispersion, earlyredemption or capital risk.All this explains why options on stock baskets remained popularin 2004, for example Coupon Driver, Cappuccino, Predator,Stellar and Trampoline (notably in Belgium, Germany, Italy, theNetherlands and Spain), along with auto-callable structuressuch as Athena, Venus and Starlight (mostly encountered inGermany, Ireland, Spain and several Asian countries includingJapan). In addition to Athena-type options, other structuresputting capital at risk made a comeback in countries wherethey had completely disappeared, like reverse convertibles (thegrowth version) and structures providing partial capital protectionwhich were seen in France and Spain.Despite a more favourable interest rate environment, exposureto dispersion and/or cancellation risk proved popular in Asia(excluding Japan) as customers asked for guaranteed couponspaid in the early years of the product’s life. Popular structuresincluded auto-callable Worst-of, Range Accrual and Venus-typevehicles.Structures in the US retail market were less exotic compared toother regions, with a majority of Stellars and Best-Ofs combinedwith an Asian Call sold. US private banks apparently were in afancier mood, showing appetite for hedge funds and commoditylinkedproducts as well as non principal protected short-termnotes.2005: The Search for Higher ReturnsWith returns well below those recorded for other asset classes,equity markets are increasingly struggling to draw the interestof investors who have turned their attention to commodities,real estate, foreign exchange, emerging market stock indices orspecific stocks as underlyings for structured investments. Theseunderlyings are either proposed alone or as a combination(‘hybrids’). First introduced in the private banking segment, theynow also account for significant volumes on the retail side.CommoditiesOil (WTI): +34% in 2004 Energy (oil and natural gas) Metals: Base (zinc, lead, nickel, copper) & precious(gold, silver, platinum) Composite indices (e.g. GSCI)Emerging Market Stock IndicesCECE EUR: +56% in 2004 CECE EUR/USD FTSE Xinhua 50 BRIC (Brazilian, Russian, Indian and Chinese stocks)Real EstateEPRA Euro Zone: +30% in 2004Indices proposed are usually the EPRA for investorsin the Euro zone and the HHPI in the UK market.OtherDividend stocksHigh potential stocksDiv. yield ABN Amro: 5% in 2004Foreign exchangeEUR/USD = +8% in 2004The Road AheadMore Exotic Underlyings,More Risk-AppetiteWhile innovation in the structured products universe has beenclosely related to pay-off sophistication for years, it now seemsthat things are changing somewhat. Investors are increasinglyshowing interest in simpler structures, with the ‘exotic’ featurebeing found rather in the underlying: commodities, real estateand emerging market stock indices should remain in demand inthe 2nd half of 2005.Though many investors have shown interest in other asset classes,equity linked pay-offs are still in demand (dispersion risk shouldactually continue to be used, as it is one means of preserving anattractive return expectancy in a low interest rate environment).However, the stock selection process tends to evolve, with investorsasking for a limited number of stocks in the basket along withvaluable buying arguments.Among other things, the auto-callable feature sweetens thebitter pill of longer maturities, one of the consequences of anunfavourable environment for structuring. This, added to itsability to cheapen the option’s premium, should keep it popularfor a long time (again in regions where interest rates remain low).Capital at risk structures, notably in regions where interest rates arelow (Switzerland, Japan, the Euro zone) are increasingly popular.Depending on the country, they are being marketed in the formof an Athena, Venus or Reverse Convertible (income or growthtype) or with capital partially protected (up to 80/90%).United Kingdom Ireland Italy Spain Portugal Greece Switzerland United States Canada Hong Kong Singapore Taiwan Korea Japan3
Page 1: StructuredProducts for Retail& Priv
Page 5 and 6: Luxembourg Belgium Luxembourg Fra
Page 7 and 8: FranceExamples of successful produc
Page 9 and 10: Scandinavia Netherlands Scandinavi
Page 11 and 12: Austria Germany Austria Central &
Page 13 and 14: Ireland Ireland United Kingdom VOL
Page 15 and 16: United KingdomExamples of successfu
Page 17 and 18: Spain Italy Spain Portugal Greec
Page 19 and 20: Greece Italy Spain Portugal Gree
Page 21 and 22: North America North America VOLUMES
Page 23 and 24: Asia (ex Japan) Asia Japan VOLUMES
Page 25 and 26: Singapore, Taiwan, Korea Asia Japa
Page 27 and 28: JapanExamples of successful product
Page 29 and 30: DisclaimerStructured Securities are
Page 31 and 32: Samurai On maturity pays out the pe

Structured - BNP Paribas

Create successful ePaper yourself

Delete template?

Save as template?