Q1 Derivative-Linked Securities Redemption Amount Down 38% QoQ... "Impact of COVID-19"

[Asia Economy Reporter Park Jihwan] The early redemption amount of derivative-linked securities in the first quarter of this year sharply decreased due to the global major stock market crash caused by the novel coronavirus disease (COVID-19). Securities firms also recorded a loss of 900 billion won in the issuance and operation of derivative-linked securities.

According to the Financial Supervisory Service on the 1st, the issuance and redemption amounts of derivative-linked securities in the first quarter were 26.3 trillion won and 27.5 trillion won, respectively, showing a sharp decline compared to 42 trillion won and 44.1 trillion won in the previous quarter.

Among them, the issuance amount of equity-linked securities (ELS) was 21 trillion won, down 13.3 trillion won (38.8%) from the previous quarter. The Financial Supervisory Service explained that this was because the issuance amount significantly decreased, centered on principal non-guaranteed ELS, as the global major stock markets plummeted in March due to COVID-19.

The redemption amount of ELS in the first quarter was 19.1 trillion won, down 15.8 trillion won (45.3%) from the previous quarter. This was due to the sharp decrease in early redemption scale as global major stock markets simultaneously crashed due to COVID-19. As of the end of March, the outstanding balance of ELS issuance was recorded at 72.2 trillion won, an increase of 1.2 trillion won (1.7%) compared to the previous quarter.

The issuance amount of other derivative-linked securities (DLS) was 5.3 trillion won, down 2.4 trillion won (31.2%) from the previous quarter, and the redemption amount was 8.4 trillion won, a decrease of 800 billion won (8.7%) from the previous quarter. The outstanding balance of derivative-linked securities issued by securities firms was recorded at 106 trillion won as of the end of March. Among them, self-hedging amounted to 62.1 trillion won.

Securities firms suffered losses in the operation of derivative-linked securities. In the first quarter, securities firms recorded a large-scale loss of 906.7 billion won in the issuance and operation of derivative-linked securities. It is presumed that securities firms had difficulties in portfolio readjustment.

A Financial Supervisory Service official said, "As the scale and proportion of self-hedging by domestic securities companies continue to increase, it is necessary to strengthen the management level of hedge asset operation risk management," and added, "We are continuously monitoring the impact of securities firms' hedge asset transactions on the financial market."

This content was produced with the assistance of AI translation services.