JPMorgan is gearing up to become a regular issuer of retail structured notes in Asia, following a novel credit/equity hybrid note launch in Hong Kong last week. "We want to provide more efficient access to structured products on both equity markets and fixed income markets," said Lionel Semonin, Asian head of the third-party group in Hong Kong.
JPMorgan has previously provided structuring capabilities for regional banks, but now the U.S. house is stepping out of the shadows to tap a wider distribution base and offer a more innovative series of derivatives in its own name.
Upcoming products will likely incorporate both equity and credit components similar to its recent launch in Hong Kong, noted Semonin. Last week JPMorgan launched its Abacus equity and credit-linked notes, which the firm says is a first of a kind for the retail universe. The principal is linked to six corporate credits including HSBC Holdings, Hutchison Whampoa and Volkswagen while the coupons are linked to a basket of 25 global equities. There is a fixed coupon of 18% for the first year and the remaining coupons are linked to a formula. Once the coupon payouts reach an aggregate of 20% the product is redeemed. The minimum life of the note is one year and the maximum is 10 years. "The principal while still at risk is linked to the fixed income market and therefore not too risky or as volatile as equity. The coupons provide good upside potential as they are linked to equity performance," he elaborated.
Six banks in Hong Kong have signed up to distribute the product, including Bank of China and Bank of East Asia.
