CACIB capitalises on self-led issuance, securities houses activity in Taiwan

The French bank has been recognised as the Best House, Taiwan, at the SRP Apac Awards 2023 for its diversified client group and steady performance throughout a difficult year.

For CACIB, the volume saw a significant decrease compared to 2021 during which lifers, a heavyweight in Taiwan's Formosa bond market, had "the best year" by deploying structured products to earn yield in a low rates environment, according to Jessica Chi (pictured), head of capital markets and fixed income sales, Taiwan at CACIB.

Since Q1 22, lifers have "substantially slowed down" their activities due to lessened new money as the Taiwanese dollar tumbled almost 10% against the US dollar - the steepest drop in 25 years – amid several Fed rate hikes.

capacity to innovate in a market that has become "much more standardised”.

On the retail side, the French bank delivered a four-fold growth in Taiwan in 2022 compared to 2020 driven by investors' expanded appetite to fixed income from equity-linked notes (ELNs).

It debuted its range of ELNs in Taiwan in 2021, adding to its long-established fixed income solutions offering.

"We managed to sharply increase the volume with securities houses, [which] made up half of the retail distribution in 2022," Chi told SRP.

In 2022, Crédit Agricole Corporate and Investment Bank (CACIB) arranged and issued approximately 150 structured notes worth US$1.5 billion in Taiwan where self-led issuance is required by regulators when it comes to retail.

Institutional investors, namely "clients' own investment" from life insurers (lifers), banks (onshore and offshore units primarily in Hong Kong SAR and Singapore), accounted for 92% of the notional while retail contributed to the remaining led by banks and securities house.

However, the results achieved by the bank's desk in Taiwan, which comprises 10 staff in sales and structuring in Hong Kong SAR and sales onshore, represented "a steady deployment" of CACIB's equity structured products franchise in Asia Pacific (Apac) in 2022, according to the bank.

The challenge to generate yield through structured products was seen across major Asian markets due to rate increases and uncertain equity market conditions.

In Taiwan, CACIB's market share continues to increase on the back of a large and diversified client base and its

A total of 102 retail structured notes, including ELNs, were issued by CACIB in Taiwan in 2022 with E.Sun Commercial Bank, Mega International Commercial Bank and DBS Bank acting as the main distributors, SRP data shows.

They products were linked to a total of 16 underlying names, including the 30year USD CMS (69 products), five-year USD CMS (56) and shares of Taiwan Semiconductor (14).

"We've tweaked some ELN payoffs in view of growing demand for full and partial principal protection. For example, investors can enjoy capital gain from shark fin while getting yield enhancement with coupons," Chi added.

Additionally, retail investors who hold a market-neutral view can benefit from coupons via a long volatility position, said Chi highlighting a principalprotected "catch profit note" with a tenor of 2.5 years offered by CACIB to a local commercial bank, which enables investors to benefit from high volatility of the equity markets without taking a directional position in a short term.

Linked to shares of Taiwan Semiconductor, the structured note offers a coupon equivalent to the absolute value of the underlying performance if a knock-out event occurs, or to zero value otherwise, in the first year.

A fixed coupon of 4.0% and 2.0% will be paid in the second year and the last half year, respectively.

The tenor of ELNs typically ranges from one month to 15 years whereas products targeted at institutional investors run for five to 20 years.

"Taiwan retail investors are very openminded and have a unique preference for longer tenor and diversified currencies in Asia," said Chi.

In Q1 23, CACIB delivered over US$500m traded notional in the market, translating to a 60% increase year-onyear. "The higher volume is driven by the redeployment of USD-denominated ELNs, which is 6.5x compared with the full year of 2022," she said.

US dollars remains the most favoured for structured notes in Taiwan, accounting for around 75% of the trades at CACIB in 2022, followed by Australian dollar, South African Rand and offshore Chinese yuan, according to Chi. For client's own investment where the traction remains limited, structured products often feature vanilla payoffs tied to interest rates, such as CACIB's callable notes.

Constant maturity swaps in US dollars are also a frequent pick in the form of range accrual or steepener notes.

Nomura deploys first bond-inverse tracker in Japan

"Both retail and institutional clients are very familiar with CMS, at least for the last decade, which makes it easy for local banks to sell. CACIB was among the first foreign banks to promote investor education on the underliers," said Chi.

"We expect to see continuing growth from retail investors as they have abundant amount of money to invest and have interest in exploring new ideas. Principal-protected notes (PPNs) are still in great demand this year."

Nomura Asset Management (NAM) has announced the launch a new ETF designed to track the performance of the JPX JGB Futures Double Inverse Index. The ETF is the first bond-inverse ETF in Japan. The ETF has been approved for listing by the Tokyo Stock Exchange (TSE). From the listing date, investors will be able to trade the tracker fund on the TSE through securities dealers and traders in Japan. The minimum investment amount for the ETF is expected to be approximately 7,500 yen (per 10 units). The ETF is part of Nomura’s Next Funds range which now comprises 68 products.

JPX JGB Futures Index Series is calculated by applying a multiplier to the daily rate of return of the JGB Futures, where the index series consist of four indexes including the JPX JGB Futures Index, JPX JGB Futures Inverse Index, JPX JGB Futures Leveraged Index, and JPX JGB Futures Double Inverse Index.