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Regulator warns of risks in some equity derivatives over market volatility

기사승인 2018.07.18  09:52:56

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The financial watchdog said Wednesday it will step up monitoring of sales of some equity derivatives, citing risks of losing capital due to global market volatility.

On the back of bullish stock markets at home and abroad, the issuance of equity-linked securities (ELS) products jumped to a record 48.1 trillion won (US$42.8 billion) in the first-half of this year, according to the Financial Supervisory Service (FSS).

ELS refers to hybrid debt securities whose returns are determined by the performance of underlying equities.

Some ELS products that track the Hang Seng China Enterprises Index (HSCEI), however, have a lingering concern of losing capital as the index is likely to be hit by a simmering trade war between the United States and China, the FSS said in a statement.

Also, brokerages and banks have "excessively" sold ELS products that track the HSCEI as one of the main underlying assets to boost their profits, the FSS said.

"At a time when global market volatility increases, there are concerns of market failure (in sales of ELS products)," the FSS said.

The FSS said it will strengthen monitoring of banks and brokerages in their sales of ELS products. (yonhap)

Kim Sua edt@koreapost.com

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