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Korean Retail Clients Eye Japanese Exposure

15 May 2004

Korean banks have recently started offering Nikkei-linked products as end users look for alternatives to the domestic market.

Korean banks have recently started offering Nikkei-linked products as end users look for alternatives to the domestic market. "A lot of end-users think the KOSPI has peaked and are no longer rolling over [long] positions," said one marketer at a bulge bracket house. S.K. Kang, head of the equity department at KorAm Bank in Seoul, said the firm plans to start offering equity-linked depositss structured on the Nikkei 225 in the coming days, likely in lots of USD20 million.

"Clients are now willing to take foreign risk," said Peter Lim, dealing manager in the equity derivatives and structured products department at Shinhan Bank in Seoul. Typical principal-protected equity-linked deposits on the Nikkei are embedded with a knockout option with a strike at 130%. The one-year deposits offer a 4-5% rebate coupon if the option is knocked out. International derivative houses sell the exotic options to the domestic banks.

15 May 2004