Asia Pacific Awards 2020 report

SRP Asia Pacific Awards Report 2020

SRP Asia Pacific Awards Report 2020

Editorial: Amélie Labbé and Pablo Conde

Data: Iveta Pekova, Veselin Krastev, Lora Stoynova, Lachezara Tsvenova and Christian Velinov

If you are interested in having a similar bespoke report produced for your organisation, please contact Jack Stannard at +85234166674 or email Jack@StructuredRetailProducts.com

1.1 Introduction

Structured Retail Products Limited (SRP), part of the Euromoney group of companies, is a provider of structured product data, news and events insights based in London, New York, Hong Kong and Sofia.

The company, founded in 2001, counts major global financial services groups, financial regulators, stock exchanges, index providers and professional services firms as clients.

SRP also owns and maintains the specialist industry website StructuredRetailProducts. com, which went live in January 2003, and has since become the leading online information source for the global retail structured products industry. With nearly 9,000 registered users and more than 26 million product listings (as of April 2020), the website is the primary information source for a wide range of businesses involved in the manufacture and distribution of structured investment products globally.

Copyright information

This report is copyright © 2020 Structured Retail Products Limited. All Rights Reserved. Reproduction and distribution of this report in any form without prior written permission is strictly prohibited.

Furthermore, this report may not be:

• sold for commercial gain, either in part or in its entirety;

• photocopied or printed for multiple use, with the exception of within the organisation for which it was purchased; or

• distributed electronically or otherwise in a manner other than that described above.

Indemnity

The information contained herein has been obtained from sources believed to be reliable. SRP disclaims all warranties as to the accuracy, completeness or adequacy of such information. Use of this report is at your sole risk, and SRP accepts no responsibility for any problems or incidents arising from its use.

Acknowledgements

This report would not have been possible without the support of the structured product industry across Asia. SRP would like to thank participants in the SRP survey from December 2019 to January 2020, whose data underpins this report.

1.2 Scope

This report is concerned with the manufacture of structured products in all product forms including wrappers such as funds, notes, bonds, certificates, deposits and life assurance, and usually linked to equities, foreign exchange, commodities, hybrids and interest rates underlyings.

It presents information on structured retail product markets across the Asia Pacific region. Although the term structured product is widely used in the financial community, it can often have different meanings. For the purposes of this report, a structured product is an investment product providing a predefined return linked to the price of one or more underlying assets. These are usually financial prices, rates or indices, but in rare cases can be sporting or other events. The product can usually be broken down into a number of separate financial instruments, one of which is usually a derivative product. Where a derivative is not used, the product will use derivative-based investment strategy or computation to provide the return.

Although simple warrants, listed options and futures, and delta one products such as tracker funds, exchange-traded funds and exchange-

traded notes are excluded, reference to these products may be made where relevant.

The report is based on both quantitative and qualitative analysis. SRP surveyed 442 structured products distributors across Asia Pacific between December 2019 and January 2020, collecting data on structured product manufacturers from the point of view of their distributor clients. The results from the survey form the basis of this report. Details of both the quantitative and qualitative analyses are available in the Methodology section of the report.

The report provides the following information:

1. the scope, methodology and management summary of the report’s key findings;

2. an analysis of the structured products market in the Asia Pacific region based on survey responses;

3. a separate analysis of the manufacturers by asset class; and

4. an analysis of top distributors’ awards.

1.3 Methodology

Description of the Survey

SRP surveyed Asian structured products distributors between December 2019 and January 2020, receiving 442 responses. The survey comprised three areas of investigation:

Part 1 Quantitative

We asked respondents to the survey to specify three investment banks that they use for hedging purposes, for each asset class in which the respondent was active. They also had to specify the volume of business for each asset class and the percentage split by bank.

Part 2 Qualitative

The respondents were then asked to rank the investment banks they dealt with for each asset class based on a score of 1, 2 or 3 (where 1 = below average; 2 = average; 3 = above average) according to three key service categories:

• price competitiveness;

• innovation and structuring capability; and

• client service pre- and post-trade

Part 3 Data validation

Captive votes and those representing internal transaction flows were excluded from the results. This includes votes cast by distributors that are part of banking groups which use their parent group for 100% of their activity and internal structuring desks. Also, votes were not included in the survey where:

• Providers voted for themselves.

• We could not confirm the identity of the respondent.

• A respondent voted more than once and we could not resolve the duplication.

The survey results underpin the 2020 SRP Asia Pacific Awards, which were handed out in the summer of 2020 because of the delays caused by the coronavirus crisis.

For the purpose of this report, the scores for each key service category for the individual banks are calculated by averaging. Service scores are, therefore, suggestive of the level of service that a client might expect to receive when working with an investment banking counterparty.

2.1 Management summary: sunny with a chance of heavy rain

Writing this management summary in 2020, in the current coronavirus dislocated world, has meant I had the opportunity to look back at the previous year with somewhat rose-tinted glasses. While 2019 was by no means a poster year in terms of issuance, volumes and the general level of activity in the Asia Pacific region, the market was generally in a more positive state of mind than it was in the second quarter of 2020.

Setting aside concerns surrounding low interest rates and low volatility – the latter now seems like a distant memory – and a lack of market direction caused by global geopolitical and economic issues, 2019 was by all accounts the calm after the autocallable storm that hit the markets at the end of 2018.

One key takeaway from SRP’s Singapore Awards 2020 survey* was that the market was moving onwards and upwards. Fundamental metrics in the region were improving as Apac was on the receiving end of positive asset flows and regional

growth, including in China. As one respondent articulated, one major challenge ahead was finding ways to generate high yield structures in a low rates environment – a concern respondents to SRP’s Europe 2020 survey also shared earlier in the year.

Scores of scores

The latest review of the performance of structured product providers delivers a mixed message which is to be expected given how choppy markets have been in the past 18 months.

The score for services including price competitiveness, innovation and structuring capability, and pre- and post-trade client services, were all up on 2018 but mostly down from the highs seen a few years ago. This means that service provision and innovation is starting to align to clients’ needs and expectations again, especially when it comes to pricing, one aspect that issuers and distributors have needed to work on to attract demand in a context of low volatility and interest rates.

This year’s scores are as follows: price competitiveness – 2.81 (2018: 2.51; 2017: 2.59); innovation and structuring capability – 2.52 (2018: 2.47; 2017: 2.59); and pre- and post-trade services: 2.48 (2018: 2.47; 2017: 2.6).

Outlook uncertain

There are few events that have made more headlines than the ongoing China-US trade war – even in the structured product space which, arguably, has an inclination towards (calculated) risk. A majority of respondents listed this particular issue as a key influencing factor for the equity market, especially because of the potential for global geopolitical tensions to make the market “tank” and damage investor sentiment.

What initially started as a commercial tug of war has slowly evolved into a widespread conflict between the world’s two largest markets, with ramifications on economic and financial fundamentals. Uncertainty as to which direction this battle is going has fed into the ongoing issue of low volatility (and related tight pricing/spread issues) and a general lack of market direction – a concern outlined by respondents everywhere including in Taiwan, Singapore, South Korea, Australia and Hong Kong SAR.

Many of these felt that circumstances were pushing investors towards more demand for “downside protection/yield/defensive plays”. One investment banker raised the concern that “pricing [is] becoming saturated for some baskets”

Add to this unrest in Hong Kong SAR, one of the largest structured product markets in the Apac region, and you may have yourself a potentially dangerous storm.

Looking ahead

As such, respondents listed two types of instruments that they believe could contribute to weathering the conflict: warrants and principalprotected notes (the first to capitalise on new opportunities and the latter because of the security afforded by capital protection).

One respondent from Singapore noted: “Looking at risk sentiments at the moment, [it] looks like

equity markets are in good shape with major indices touching new highs. I expect stepdown autocallables and [fixed coupon notes] to continue to be popular with more index plays as investors look to diversify more.” Another, hailing from South Korea, said that there were significant “prospects for expanding principal guaranteed products”.

Searching for yield in the current low rate environment was a key concern shared across markets and jurisdictions, and this went hand-inhand with “innovation in terms of underlyings” and the more cryptic “finding opportunities”.

The demand for innovation appears consistently in SRP surveys, be it when it comes to underlyings or payoff types, though as one banker from Australia put it: “[Interest rates in a downturn environment] make it difficult to generate extraordinary payoffs compared with other investment products such as fixed income products.”

Asian investors’ appetite for US equities is welldocumented – with the major US indices doing a roaring trade in the key Apac markets of South Korea, Hong Kong SAR and Singapore - but could pose some pricing and valuation challenges.

“Most international stocks [in particular in the US market] are at historical high levels which increases clients’ reinvestment risk,” said an investment manager from Australia. Another, also from Australia, noted that “investors are worried US equities are too expensive now”. One banker from Singapore suggested (possibly not in a totally selfless tone) that “with yields remaining low, we can expect more investors on higher yielding Asian equities, particularly SG stocks”.

“Maintaining yield and finding companies that are not overpriced [and] finding decent products with good yields and not taking on too much risk,” answered another survey participant from Singapore. Another from Australia highlighted that “the US market has had a very good run in recent years...when will it end?”.

*SRP’s Asia Pacific survey was conducted between December 2019 and January 2020. It gathered 442 responses.

SRP Asia Pacific Personality of the Year: Keri Neo

Keri Neo is the recipient of this year’s Personality of the Year award, after securing the most votes from market participants in SRP’s Asia Pacific awards 2020 survey.

She is currently the Singapore Exchange’s (SGX) head of securitised products, focusing on product development and management for listed products including exchange-traded funds (ETFs), structured warrants and daily leverage certificates (DLCs). She started her career at SGX in 2007.

What is (are) your proudest achievement(s) career-wise?

I have been at SGX for 13 years now – it’s a long time but it’s been amazing!

I have largely been focused on product and business development, so throughout my career, there are several things that have made me very proud. I am very pleased about the range of products that has flourished under my care.

Seven to eight years ago, I was managing equity futures contracts, and at that point, liquidity on-screen for some new contracts were low. But we overcame them and managed to build liquidity for our nascent products.

After that, I transitioned to leading the ETF business – it was a lot of ‘entrepreneurial’ work, and there were inherent challenges in various steps of the product lifecycle. We kept at the daily grind, continuously solving problems hand-in-hand with products issuers, and at the same time educating investors about how ETFs work. I am glad that this brought in results, and ETF investors in our market have grown fivefold since.

Did you always know you wanted to work in the structured product field?

I joined SGX through the management associate programme. In the first two years, I rotated between the market development, operations and regulatory functions, and this helped me appreciate the end-to-end nature of the exchange business.

In last decade, I have been primarily been focused on product development, first in derivatives and later in securitised products. I have had the opportunity to pick up knowledge in various asset classes.

Finally in the past three years, I have been looking at warrants and DLCs as well – these are closer to SRP’s core subject area. I am proud that SGX is the first and only Asian market to have offered DLCs so far.

What advice would you give to someone who wants to work in this market?

As structured products and the financial industry are so dynamic and ever changing, learning fast and adapting is critical in this line of business.

At the same time, my high-achieving colleagues in the industry are those who maintain humility and a great attitude, and are on the constant lookout for opportunities even in the smallest of things.

Lastly, being organised is very important. There are always more opportunities (and sometimes issues) than one has time for, and being organised will help you deal with all of that.

How has the Singaporean market changed since you started your career?

Looking back at least decade, the financial industry has been through tremendous changes, including shifts in regulation, the growth of the Asia Pacific region, and advances in technology. The centre of gravity has also shifted to Asia, led by growth from emerging markets in the region.

Globally, we have become more connected but also more complex.

In the past 10 years, I have witnessed how SGX, as a core infrastructure of Singaporean financial markets, has grown in relevance for the global audience and expanded our role from being a stock exchange back then, to a multi-asset exchange today.

Singapore’s standing as a financial safe haven has also been built over a long time. If you think about notable events such as the various financial crises (both global and regional), epidemics such as SARS and now Covid-19,

where a lot of turmoil has happened, investors have looked to Singapore for support. This is because of Singapore’s stability, in terms of politics, policies and economic environment.

What many of these events have taught us is that financial markets are critical to managing risk and safeguarding the resilience of our economy. With news and information moving rapidly, investors must be given the opportunity to react with confidence and manage their portfolio risks efficiently. This role has intensified with Covid-19 and SGX continued to maintain access around the clock for investors.

Where is Singapore heading in the next 12 to 18 months?

SGX’s focus has been opening access to Asian markets in a trusted and efficient way that global institutions have come to recognise us for.

A lot of the current and future growth comes and will continue to come from emerging markets in Asia. These are younger markets that are growing tremendously fast. As such, we have to position our portfolio of products accordingly, to serve the needs of these investors.

SGX’s goal remains the same: to be a global multi-asset exchange that is horizontally and vertically integrated, covering all major asset classes in the Asian time zone, certainly including that of structured retail products.

A lot of the current and future growth comes and will continue to come from emerging markets in Asia. These are younger markets that are growing tremendously fast

Hong

Hong

3.0 Trends & Predictions

What will the most popular payoffs be over the next 12 months for your market?

According to 67% of all respondents in the SRP Asia Pacific Awards Survey 2020, the autocallable will be the payoff to look out for in the region over the next year. This payoff’s market share, also taken in combination with other payoffs, reached nearly 60% in 2019, dominating in key markets such as South Korea, Hong Kong SAR, Japan and Taiwan. The digital option, which is mostly popular in China and Hong Kong SAR, came in second with eight percent of the votes, slightly lower than in the previous year. The protected tracker rose to third place, with six percent of the votes (last year: four percent), primarily because of its popularity in South Korea.

All other payoffs saw a drop in popularity: the

callable option saw a significant fall to five percent (from 10% in the 2019 figures). Only the reverse convertible and the worst of option saw a rise from the one percent they received in the 2019 survey, to three and two percent respectively this year. Both the accrual and range payoffs (with two percent each this year) received three times fewer votes than in 2019. The votes for the shark fin option from last year were also relocated, leaving it with only one percent.

In the ‘Other’ payoff option, highlights include the accumulator and glider, suggested by Hong Kong SAR and Singapore voters respectively. None of last year’s private equity, warrants, and twin-win found their place on the list.

3.0 Trends & Predictions

Which of the following investment themes will be the most prominent over the next 12 months?

The most prominent investment theme anticipated by respondents in the survey centered on equities in developed markets for the third consecutive year: this received 66% of votes, a 24% increase from 2019. The appeal of the environmental, social governance thematic dramatically increased from last year’s three percent as it took the second place with 13% of the votes in the survey. Emerging market equities, however, dropped to joint third place

with volatility-based investments and credit investments, receiving six percent of votes each.

Proprietary and custom indices saw a decrease in interest with only one percent of votes, compared to the four percent it received in the 2019 survey. Alternative investment themes continued to lose popularity among voters with their votes dropping for the second consecutive year to two percent in 2020.

4.0 Manufacturer Awards

These awards are calculated on the basis of the following factors.

• Survey of market – each factor has a 25% weighting.

- price competitiveness;

- innovation and structuring capability;

- client service pre- and post-trade; and - sales volume.

• Editorial Submission

Each shortlisted manufacturer will need to submit an editorial piece of up to 400 words.

The winner will be selected by an independent panel of judges convened and chaired by SRP.

Best House, Asia Pacific

Survey ranking

Editorial ranking

Best House, Equity

Survey ranking

Editorial ranking

Best House, Asian Equity

Survey ranking

Best House, US Equity

Survey ranking

Best House, Foreign Exchange

Best House, Interest Rates

Survey ranking

Best House, South and Southeast Asia

Survey ranking

Best House, Japan

Best House, South Korea

Survey ranking

Editorial ranking

Best House, Hong Kong

Survey ranking

Editorial ranking

Best House, Taiwan

Survey ranking

Editorial ranking

5.0 Distributor Awards

The award for Best Distributor is based on full sales and performance data per product distributed by the buy-side between 1 December 2018 and 30 November 2019. Strike date is relevant for best sales and maturity date is relevant for best performance. The results of both are amalgamated and put towards the best distributor award. Sales volume represents total sales invested rather than the notional amount, and performance is the annualised return an investor would have received with a buy-and-hold approach from the strike date until maturity for a product. Each product’s performance is weighted according to its sales volume to give a weighted average performance of the distributor’s portfolio of maturing products for the period.

Best Distributor, Asia Pacific

Top 5 distributors by sales (US$m)

Top 5 distributors by weighted-average performance (%)

Best Distributor, Hong Kong

Best Distributor, Japan

Best Distributor, Taiwan

Best Distributor, South Korea

Best Distributor, India

Best Capital-Protected Distributor, Asia Pacific

Best Yield Enhancement Distributor, Asia Pacific

6.0 Shortlists

6.1 Manufacturer Awards

Best House, Asia Pacific

BNP Paribas

Citi

JP Morgan

Société Générale UBS

Best House, Equities BNP Paribas

Citi

JP Morgan

Société Générale UBS

Best House, Asian Equities Credit Suisse

JP Morgan

Leonteq

Société Générale UBS

Best House, US Equities

Citi

JP Morgan

Leonteq

Société Générale UBS

Best House, Foreign Exchange

BNP Paribas

Citi

JP Morgan

Leonteq

Société Générale

Best House, Interest Rates

Citi

DBS Bank

Morgan Stanley

Nomura

Société Générale

Best House, Taiwan Credit Suisse

DBS Bank

Morgan Stanley

Société Générale UBS

Best House, South and Southeast Asia

BNP Paribas

HSBC

Société Générale

UBS

UOB

6.2 Distributor Awards

Best Distributor, Asia Pacific

KB Financial Group

First Securities

Korea Investment

Mirae Asset

Samsung Securities

Best Performance, Asia Pacific

E Sun Bank

Far Eastern Group

KGI Asia

First Securities

SinoPac Holdings

Best Distributor, South & Southeast Asia

Edelweiss Capital

Leonteq Securities

Maybank

Reliance Group

UOB

Best House, South Korea

BNP Paribas

Citi

Credit Suisse

Société Générale UBS

Best House, Hong Kong

BNP Paribas

JP Morgan

Leonteq

Société Générale UBS

Best House, Japan

BNP Paribas

Credit Suisse

HSBC

Société Générale UBS

Best Performance, South & Southeast Asia

Citi

Edelweiss Capital

Maybank

Reliance Group

UOB

Best Private Bank, Asia Pacific

Submission only

Best Private Bank, South & Southeast Asia

Submission only

Best Capital-Protected Distributor, Asia Pacific

Edelweiss Capital

KB Financial Group

Korea Investment

Mirae Asset

Nonghyup

Best Yield Enhancement Distributor, Asia Pacific

Hana Financial Group

First Securities

KB Financial Group

Mirae Asset

Samsung Securities

6.3 Best Service Providers

Best Index Provider

Hang Seng Indexes

Korea Exchange

MSCI

S&P Dow Jones Indices

STOXX

Best Pricing and Risk Analytics

Provider

Bloomberg

Numerix

LPA/Modelity

Privé Technologies

Thomson Reuters

Best Issuance Platform – Multi-Dealer

Bloomberg DLIB

FinIQ EQ Connect

Leonteq Constructor

Privé Technologies

Stropro

Best Issuance Platform –Single-Dealer

Credit Suisse – Mysolutions

Haitong International

Natixis - eMaps

Société Générale – SG Markets

UBS – Equity Investor

6.4 Other Awards

Best Educational Initiative

Based on editorial submission

Best RegTech Solution

Based on editorial submission

Most Innovative Product

Based on editorial submission

Most Innovative Index

Based on editorial submission

Best Structured Product and Derivatives Exchange

Australian Securities Exchange

HKEX

Japan Exchange

Korea Exchange

Singapore Exchange

Best Warrant Provider

Based on editorial submission

Personality of the Year

Based on votes in the APAC survey

Deal of the Year

Based on editorial submission

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7.0 Awards Results

7.1 Best House and Distributor Overall Winners

Manufacturer Awards

Best House, Asia Pacific Société Générale

Best House, Equities Société Générale

Best House, Asian Equities Credit Suisse

Best House, US Equities Citi

Best House, FX Leonteq

Best House, Interest Rates Citi

Distributor Awards

Best Distributor, Asia Pacific Samsung Securities

Best Performance, Asia Pacific First Securities

Best Distributor, South and Southeast Asia UOB

Best Performance, South and Southeast Asia Edelweiss Capital

Best House, South Korea Credit Suisse

Best House, Hong Kong JP Morgan

Best House, Japan Société Générale

Best House, Taiwan Credit Suisse

Best House, South and Southeast Asia HSBC

Best Private Bank, Asia Pacific UBS

Best Private Bank, South and Southeast Asia DBS Bank

Best Capital-Protected Distributor, Asia Pacific Mirae Asset

Best Yield Enhancement Distributor, Asia Pacific Samsung Securities

Service Providers

Best index provider

S&P Dow Jones Indices

Best multi-dealer platform Leonteq (Leonteq Constructor)

Best single-dealer platform Haitong International’s HTIWarrants

Best pricing and risk analytics provider Numerix

Best structured product and derivatives exchange HKEX

Best warrant provider Société Générale

Other Awards

Personality of the year – Apac 2020 Keri Neo

Best regtech solution LPA

Deal of the year Credit Suisse’s Dispersion Trade

Most innovative index 5G Frontier Index (Credit Suisse)

Most innovative solution HKEX’s inline warrants

Best educational initiative Stropro

7.2 Best Sales and Performance by Region and Country

Australia

Best Provider: UBS

Best Performance: Sequoia Group

South Korea

Best Distributor: Samsung Securities

Best Performance: Meritz Securities

Japan

Best Distributor: Mitsubishi UFJ Morgan Stanley Securities

Best Performance: SBI Securities

Taiwan

Best Distributor: DBS Bank

Best Performance: First Securities

Hong Kong

Best Distributor: HSBC

Best Performance: HSBC

Singapore

Best Distributor: UOB

Best Performance: Maybank

Thailand

Best Distributor: Leonteq Securities

Best Performance: Leonteq Securities

India

Best Distributor: Edelweiss Capital

Best Performance: Edelweiss Capital

8.0 Appendix Analysis of respondents