Market officials expect the Korean retail market to open to credit-linked products in the coming months, on the back of regulatory changes. Such a move would follow the massive growth in equity-linked structures in the past few years, for which barrier option structures linked to the domestic KOSPI index have been popular. Market officials say the Financial Supervisory Service is looking to permit credit-linked structures for retail investors as part of continued market liberalization. Douglas Kim, spokesman at the FSS in Seoul, did not return calls by press time.
"There's a lot of potential," said S.K. Hong, director at ABN AMRO in Hong Kong, noting, "Korean investors are well-educated and can accept exotic products." Such trades would likely be structured by international firms and sold via domestic houses.
"This is something we're hoping to see soon," said a senior derivatives official at Woori Bank. Market participants also noted that such transactions would probably be focused on baskets of domestic credits with which clients are already familiar.
Retail credit products have also been taking off elsewhere in the region. For instance, a market has been developing in Hong Kong where several houses, including BNP Paribas (DW, 10/14), JPMorgan and Lehman Brothers, have launched such deals, and more recently starting in Singapore.
