Structured - BNP Paribas

Asia (ex Japan) Asia Japan VOLUMES & KEY PLAYERSAsia ex Japan saw significant increases in retail volumes in 2004.Total issuance amounted to $30bn in 2004, compared to a mere$22bn in 2003 (36% increase). Main issuers were BNP Paribas,UBS, JP Morgan, Société Générale, CSFB.PRODUCTS & STRUCTURESAsian markets have seen structured product investors movingtowards more and more non principal-protected structures,increasingly short denominated. Another trend is towardscoupon products that offer investors the opportunity to obtainan attractive guaranteed coupon over the first few years of theproduct’s life in addition to an early redemption feature.While investors are willing to invest in non-principal protectedstructures, the maturities for these products are alwaysshorter than for those offering 100% capital protection atmaturity.Since the beginning of 2005, Asia has remained one of the mostinnovation-driven markets in the world.In addition to the trend towards short-term products observedin 2004, early redemption products are expected to sell. For2005, the main trend should be increasing demand for hedgefund- and mutual fund-linked structures, combined with abest-of profile pay-off. The demand for commodity and hybridunderlyings should be steady compared to 2004, but non-principalprotected notes are expected to keep on growing.After being structured as funds in the last few years, most productsare now structured as notes. As regards underlyings, the marketis moving away from large baskets of global or Asian stocks in2004 to baskets of fewer than 10 Asian (mainly Hong Kong)stocks.In Hong Kong, a large array of non-principal protected productshas been launched in the retail market. Maturities typicallyrange from 2 to 3 years, but an easily achievable target redemptionfeature that enables investors to shorten the length of theirinvestment often accompanies the products. Still on the retailside, principal protected products have also been marketed butwith longer maturities (from 5 to 10 years). All of the mainretail products were coupon-type products with guaranteedattractive coupons over the first few years, with the Worst-Ofpay-off being the most widely used. On the private bankingside, products launched in Hong Kong and Singapore have beensimilar, with even shorter maturity coupon products (1/2 years)and products ranging from Best-Of to Worst-Of.In Taiwan, an exclusively retail market, BNP Paribas’ marketersobserved increasing demand for principal protected products,with maturities of up to 10 years. In this specific market,long-term principal protected products combined with targetredemption features appealed to Taiwanese investors, as well asvery short-term (from 6 months to 2 years) non-principalprotected products. Even though Worst-Of products are stillpopular, demand seems to be moving towards Best-Of structures.As far as underlyings are concerned, particular interest has beenobserved in real estate and mutual fund-linked pay-offs.In the Korean market, which seems to be dominated by shortterminvestments, there has been strong demand from retailinvestors for non-principal protected products. The earlyredemption feature has increasingly been added on to thesealready short-term investments.Although Asian markets are still being driven by their largestplayer, Hong Kong, each of the 4 main Asian markets has itsown specific features.23