Demand for Japan-linked structured equity products is surging in Asia, following elections last month. "Japan is a hot topic lately," said Edward Ho, senior managing director at Bear Stearns in Hong Kong. On the back of improving economic outlook and the elections that provided Prime Minister Junichiro Koizumi with a mandate for continued reform, investors across Asia have been looking at index-linked and worst-of stock baskets structured products to gain exposure to the Japanese market. "We've seen much more interest in Japan following the election. Not only clients in Asia but also in Europe are becoming more bullish," said Edwin Bernard, Asian head of equity derivative product sales at ING Financial Markets in Hong Kong.
Among the products, ING has recently started marketing Japan Leverage Notes to clients bullish on the Japanese market, said Bernard. The notes, with a six month maturity, have full downside risk to the Nikkei 225 index but also offers leveraged upside exposure, for instance any gains in the index by maturity are multiplied by 1.25 or so.
Anticipated reforms are also propping up the financial sector. "Lots of structures are being linked to baskets of banks," added Ho.
