UBS comes on board as new DLC issuer on SGX, to list 10 new DLCs

UBS has come on board as the Singapore Exchange's (SGX) new daily leverage certificates (DLC) issuer. This makes it the second bank in the Republic to do so.

Starting Tuesday (Feb 15), UBS will list 10 long and short DLCs offering fixed leverage of up to 7 times the daily performance of Tencent, Alibaba, Meituan, BYD and the Hang Seng Index. These 5 DLCs were among the top 10 most traded DLCs on SGX in 2021, the bourse operator said in a press statement.

Winni Cheuk, UBS's head of sales, public distribution for APAC, said the bank has spotted quite a lot of volatility in the underlying Hong Kong stock names recently, and believe now is a good time to launch DLCs.

"This market environment allows investors who hold either a bullish or bearish view to gain more exposure with less required capital and a fixed daily leverage," she added.

DLCs are high-risk financial products that give investors a leveraged return based on the daily performance of an underlying reference instrument such as a stock or securities index like the Straits Times Index.

Only investors qualified to train in specified investment products (SIP) can trade in DLCs as they have structures, features and risks that may be more complex to everyday investors.

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For example, if the underlying index moves by 1 per cent from its closing price of the previous trading day, the value of a 7x DLC will move by 7 per cent. This applies to both losses and gains.

There are around 250 DLCs listed in Singapore at the moment, SGX told The Business Times. These DLCs have generated over S$10 billion of trades since their launch in July 2017. SGX said it was Asia's first venue to offer DLCs, allowing SIP-qualified investors to gain fixed leverage exposure to Asian indices at a fraction of the underlying price.

Societe Generale was the first bank to roll out the product in Singapore and the region in 2017.

Its first batch of DLCs also comprised 10 products, including long and short DLCs, offering fixed leverage of 3 or 5 times the daily returns of the MSCI Singapore Index, Hang Seng Index and Hang Seng China Enterprises Index.

The exchange-traded leveraged financial instrument was first introduced in Europe. DLCs offer investors more options to hedge and capture investment opportunities.

SGX head of equities Michael Syn said: "With DLCs linked to regional indices gaining popularity, we are also seeing interest from issuers to launch DLCs with US indices as the underlying."

UBS APAC head of public distribution Vassili Reperant noted: "This is another important milestone for our retail structured product business in Asia, following the launch of our warrant business in 2008."