Shinhan's ELS gaining popularity

By Yi Whan-woo

Shinhan Investment said Monday its latest equity-linked securities (ELS) product has gained popularity since it was released in January.

The ELS is based on the performance of three indexes ― KOSPI200, HSCEI and EUROstoxx50.

An ELS is a hybrid fixed income instrument whose return is partially dependent upon the performance of an underlying equity such as stock indexes, basket of stocks or a mix of these.

The brokerage arm of Shinhan Financial Group said its product, titled First Step 85 Barrier ELS, allows its subscribers to exercise the right to sell their products before the three-year maturity. They can do so every six months under a contract agreement.

Under the agreement, investors can get principal back and make interest income if the average of the three index does not fall below 85 percent of the original index.

The level of 85 percent is lower than those of other ELS sold by other securities companies with the same maturity period, according to the brokerage house.

“Most of the three-year maturity ELS has set the level at 90 percent or higher,” said Shinhan Investment manager Choi Young-sik.

“You can see we have minimized the risk for our investors in their attempt to raise profit from ELS.”

He added that some 76 percent of the investors retrieved their principal plus an average interest of 6 percent in the first six months after they purchased the product.

The ELS has attracted investment of some 120 billion won ($115.4 million) so far.

The company said that the level will be lowered over time and will fall by 80 percent by the end of the contract.

Private bankers at Shinhan Investment picked First Step 85 Barrier ELS as the best ELS, according to the firm.