Shinhan Financial Investment Opens Mobile Trading System for Contingent Capital Securities

[Asia Economy Reporter Lee Jung-yoon] Shinhan Financial Investment announced on the 10th that it has opened a system that allows the purchase of contingent convertible bonds issued by financial holding companies or banks via mobile. Contingent convertible bonds can be purchased through Shinhan Financial Investment's mobile trading system (MTS), Shinhan Alpha.

Contingent convertible bonds have characteristics between stocks and bonds, and are bonds recognized as capital by financial authorities for accounting purposes, issued by financial institutions to strengthen their own capital. They have the nature of bonds that pay interest and have no maturity. Under certain conditions, the obligation to pay interest disappears, or if the issuer is designated as a distressed financial institution, the bonds are written off. Investors can expect better returns by taking on more risk compared to general bonds.

The contingent convertible bonds sold by Shinhan Financial Investment are bonds with a 5-year or longer call option issued by major domestic financial holding companies and banks. They are perpetual bonds with no maturity, but have the characteristic of being redeemable early if the issuer exercises the option. The interest rate varies depending on the issuer's credit rating and the remaining period until the first call option exercise.

Kim Ki-dong, Head of FICC Sales Division, said, "Due to the recent sharp rise in the base interest rate and market interest rates, the issuance interest rate of contingent convertible bonds has also risen to the 4% range, attracting popularity."

He added, "Customer demand for contingent convertible bonds issued by Woori Financial Group in February, NongHyup Financial Group in March, and NongHyup Bank in April has been steady, and the issuance of contingent convertible bonds by KB Financial Group is also scheduled for May," and stated, "We have opened the service to allow the purchase of various contingent convertible bonds non-face-to-face."

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