The retail market heated up in Asia, with a wave of players entering the field and a wider array of complex structures being offered. For instance, the number of houses in Hong Kong branding their own derivative products to the retail base jumped this year from seven or eight to 13. Firms including ING Financial Markets (DW, 1/24), BNP Paribas (DW, 10/14) and Barclays Capital (DW, 8/19) entered the fray, while Bear Stearns (DW, 3/18) and Nomura Securities (DW, 7/15) set up new equity derivative desks for their initiatives.
With the number of entrants increasing, firms have become more creative as margins for traditional structures have been squeezed. "The retail space has become much more complex this year--exotic structures have become commonplace," said James Rodríguez de Castro, managing director in global equity markets at Merrill Lynch in Hong Kong. Innovation shifted into high gear as, for instance, credit-equity hybrids have been developed, along with commodity-linked structures, coupons linked to volatility rather than direction of stocks, and the retooling of features such as a decreasing call option strike (DW, 12/16). High initial coupons and early redemption triggers were also popular features this year.
The derivative warrants market was another hot area for retail, with volumes picking up significantly in Hong Kong and Singapore. ABN AMRO (DW, 5/13) re-entered the market while Goldman Sachs (DW, 7/8) and UBS (DW, 8/12) launched their own equity warrants. Earlier this month, all eyes were on Korea, when a domestic warrant market got under way (DW, 12/12).
