Korea and Taiwan were the hottest markets in Asia this year. "The main driver was market liberalization," said Chi-won Yoon, managing director in equity risk management at UBS in Hong Kong. "For instance, in Korea dealers issued onshore equity-linked deposits while in Taiwan insurance companies, which hold substantial assets, can now buy a much bigger chunk of foreign currency-denominated structured products," he explained.
The onshore Korean equity derivatives market got the green light last year, but 2003 saw the first domestic equity-linked notes (DW, 5/4). On the fixed-income side, most investors anticipated that interest rates would remain low and therefore bought structured products, such as target redemption notes, according to S.B. Hwang, head of marketing at Citigroup in Seoul. But most of the talk was about the regulator giving the go-ahead for an onshore credit market (DW, 7.27). This didn't materialize, but is widely expected to happen next year, according to Hwang.
Bankers in Korea are also likely to be celebrating the opening up of the multi-billion dollar investment trust industry and domestic security house market to derivatives in the coming weeks, according to James Rodríguez de Castro, managing director in global equity-linked products at Merrill Lynch in Hong Kong (DW, 11/9).
In Taiwan, bankers got an onshore credit market. It started with Deutsche Bank, BNP Paribas and Credit Lyonnais receiving licenses in January (DW, 1/26). Later in the year, Fubon Securities became the first Taiwanese firm to invest in a CDO tranche and the market started in earnest (DW, 5/4) with other firms, such as Chinatrust Commercial Bank, signaling their intent to take the plunge (DW, 11/23). Market officials also attributed increased equity volumes in Taiwan to the legalization of borrowing shares for hedging (DW, 7/6). "It's still the early days but the use of stock lending should result in new products," said UBS' Yoon.
