ELS Issued at ‘KOSPI 9,000’ Near Maturity... Growing Concerns Over Principal Losses

[Financial News] ELS (equity-linked securities) with maturities of one year or less will begin coming due next month. These ELS were issued in June touting high yields, but concerns about principal losses are growing as the KOSPI has recently fallen sharply.
According to the Korea Securities Depository on the 15th, 94 ELS with maturities of one year or less were issued in June, excluding DB Happy Plus 2282 (public offering; matured last September), with a total issuance value of 180.2 billion won. The top 10 issuers by issuance volume accounted for 12 trillion won in total ELS issuance from January through June this year, including public and private offerings; the June issuance amount was about 1.5% of that figure.
The concern is over ELS with maturities of one year or less that were issued in June. They were issued when the KOSPI was around 9,000, and their maturity dates are now approaching after a sharp market decline. The KOSPI surged to 9,114.55 at the close on June 22, but had fallen to 5,290.53 by the 13th—a decline of 42%.
Of the 94 ELS with maturities of one year or less issued in June, 76 products worth 178.6 billion won are based on domestic assets, excluding those based on foreign assets such as Tesla and Micron. The 76 products are based on the KOSPI 200 (48 products), Samsung Electronics (38) and SK hynix (42), with overlapping counts.
Maturities are scheduled for 12 products worth a total of 19.7 billion won in December. Another 64 products worth 153.9 billion won will mature from January through early July next year. The public offering ELS NH Investment & Securities 24866, issued by NH Investment & Securities on June 26, matures on the 24th of next month. Its underlying assets are SK hynix and the KOSPI 200. Their respective reference prices are 2,673,000 won and 1,366.49.
The product, with an annual yield of 27.45% (13.725% over six months), was not redeemed early in September because the assessed prices of its underlying assets fell below 85% of their reference prices. As of the 13th, SK hynix stood at 1,224,000 won and the KOSPI 200 at 824.78, just 45.7% and 60.3% of their respective reference prices. SK hynix in particular is approaching its knock-in threshold of 935,550 won (35% of its reference price). If a knock-in is triggered, the conditions for receiving the principal and promised return at maturity become stricter.
Mirae Asset Securities 37903 (private placement), with an annual yield of around 20%, matures on the 30th of next month. Its reference prices are 340,500 won for Samsung Electronics and 2.58 million won for SK hynix. The knock-in thresholds, set at 30% of the reference prices, are 102,150 won for Samsung Electronics and 774,000 won for SK hynix.
NH Investment & Securities’ “N2 ELS 321 (public offering)” once plunged below its knock-in threshold. The product was issued on June 18 for 7 billion won and offers an annual yield of 47.1%. Its underlying asset, SK hynix, had fallen below 1,208,250 won, which is 45% of its initial reference price of 2,685,000 won.
Samsung Securities 31165 (private placement; annual yield of 15.2%), issued on June 25, matures on June 28 next year. Its underlying asset is the KOSPI 200, and the product will be redeemed early if the index does not fall below 684.81 by December 24. If it falls below the knock-in threshold of 479.36 (35% of the reference price), investors could lose their principal.
[email protected] Lee Hae-ram Reporter