S.Korea's outstanding derivatives-linked securities fall in 2 years

Source: Xinhua | 2019-12-26

The outstanding derivatives-linked securities in South Korea fell in nearly two years during the third quarter following the recent mis-selling of derivatives-linked funds, financial watchdog data showed Wednesday.

The outstanding value of derivatives-linked securities stood at 111.2 trillion won (95.5 billion U.S. dollars) as of the end of September, down 4.3 percent from three months earlier, according to the Financial Supervisory Service (FSS).

It marked the first quarterly decline in almost two years since the fourth quarter of 2017.

The decline was attributed to the recent mis-selling of derivatives linked to overseas interest rates. Earlier this month, the FSS recommended a compensation rate of 40-80 percent over six mis-selling cases.

Derivatives-linked securities are the financial products that track the performance of underlying assets, such as stock indexes, interest rates, currency values and other assets. The products are preferred by investors pursuing high yield despite high risk.

During the July-September quarter, the issuance of derivatives-linked securities reached 24.5 trillion won (21 billion U.S. dollars), down 32.7 percent from the previous quarter.

The issuance of equity-linked securities (ELS) and equity-linked bonds (ELB) tumbled 35.3 percent in the cited period, while the sale of derivatives-linked securities (DLS) and derivatives-linked bonds (DLB) dropped 24.4 percent.

The ELS and ELB track the performance of benchmark stock indexes, while the DLS and DLB determine their returns based on the performance of interest rates, currency values and other assets.