Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
HK-tied ELS losses loom once again amid plunging index
People walk past a panel displaying figures of the Hang Seng China Enterprises Index in Hong Kong, Tuesday. Reuters-Yonhap
By Lee Yeon-woo
As Asian stock markets plunged on Monday, concerns about investor losses related to equity-linked securities (ELS) tied to the performance of the Hang Seng China Enterprises Index loomed over Korea once again.
According to industry sources, Tuesday, the combined loss of six major banks here — KB, Shinhan, Hana, Woori, NH, and Standard Chartered — is expected to reach 466 billion won ($338 million) if the index falls below 5,700.
Earlier, the banking industry had anticipated there wouldn't be any additional losses starting from August, suggesting that the index can maintain a level above 6,500. If the index falls below the 5,700 mark at the product's expiration, sources anticipated the scale of the losses could be larger than expected.
As of 3:20 p.m. Tuesday Korean time, the index is trading at 5,840.81, a 0.58 percent decrease from the previous day. Once poised to break through the 7,000 level, the index began to plunge from Friday, even hitting 5,771 on Monday, its lowest since May.
Since the end of 2023, when the index started to plunge, many Korean investors have experienced disappointing results. Some have accused banks of mis-selling, saying they were told that the products were "without principal loss." The industry is in the process of compensating customers, with 66.3 percent of cases reaching agreement.
However, since the sales volume of ELS in the second half of this year is not significant, the impact is expected to be less than in the first half, according to industry officials.
"If the index drops to the 5,700 level, the losses could exceed expectations and potentially impact ongoing compensation efforts. While we believe the impact will be less significant than in the first half of the year, we are closely monitoring the stock price trends," an industry official said.