DBS PB introduces new covered call play via structured notes

DBS Private Bank is gearing up to launch its first ever minimum redemption of principalat-maturity notes linked to an in-house fund.

large contribution to total returns over the long term,” said Jaisingh.

DBS remains optimistic about the performance of risk assets in 2023 in anticipation of a bounce following a “precipitous decline” in the market last year.

we'll focus on downside protection including features like look-backs, lock-ins and deep airbags,” said Jaisingh.

The past year ended with a rare confluence as both equities and bonds performed very negatively.

With an investment duration of two or three years, the notes will track the performance of the DBS CIO Barbell Income Fund, which was launched in February 2021.

“We’re speaking to a few hedge providers,” Rohit Jaisingh (pictured), managing director, head of capital market products at DBS Bank told SRP.

“This will be our first minimum redemption of principal-at-maturity notes linked to an in-house fund. It articulates our barbell approach to investing –investing in high growth secular winners and high dividend yielding stocks with a focus on income-generation.”

DBS CIO Barbell Income Fund uses a covered call to enhance income generation in addition to traditional credit and dividend strategies.

“We believe that high dividend yielding stocks are resilient – the dividends have a

“The main risk factor is still inflation and policymakers’ reaction to this,” said Jaisingh, adding that the issues that plagued supply chains earlier in 2022 were resolved over the second half of 2022 and energy prices like natural gas have come off their peaks.

“Hence, we're hopeful that the Fed pivot will happen sooner rather than later, and that inflation and rate hikes will not be a continuing concern for much longer.”

According to Jaisingh, China’s re-opening in early January has added confidence for investors and some sectors, particularly technology, have been performing well since then.

The bank believes that quality companies, which are defined as firms with the three Cs - consistent growth, consistent cash flow generation and return on capital, will re-emerge as secular winners.

“If that turns to be the case, we will go back to offer yield enhancement and growthoriented structured products linked to these stocks. If the high volatility persists,

“Clearly this had an impact on structured product markets as it led to a huge risk-off mood globally. In Asia, we saw a large asset class rotation. Equity underliers had been the key driver of growth in Asia up until 2022 declined in popularity,” he said.

Meanwhile, the price volatility in foreign exchange (FX) markets lifted and commodity turned the only asset class that delivered a positive return led by energy, gold and silver through 2022.

The total traded notional of equity-linked structured products at private banks in Singapore and Hong Kong SAR decreased between 40% and 60% in 2022 year-onyear. FX-linked structured products rose almost 100% YoY while rates and creditlinked structured products moved up almost 50% in terms of traded notional, noted Jaisingh.

“I reckon that it's been more of an even split across FX, fixed income and equities by traded notional of structured products for the private banks, unlike in the previous years where equity was two to three times FX and fixed income,” he said.