S Korean derivatives boom as stocks fall short

Hong Kong

SALES of derivatives tied to global stock markets in South Korea have set an annual record in the first 10 months of 2014, as equity and bond returns fall short.

Structured products whose returns are tied to the performance of a particular company or share index rose to 54.7 trillion won (S$64.6 billion), beating full-year offerings in Korea Securities Depository data going back to 2003. The derivatives often carry coupons of about 6 per cent versus average bank deposit rates of 2.24 per cent. Top-rated five-year corporate bonds yield 2.44 per cent.