As of 2024, the Equity-Linked Securities (ELS) based on the Hong Kong H-Index (Hang Seng China Enterprises Index) are recording substantial losses. The ELS products sold by the top five banks in Korea (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have incurred a principal loss of approximately KRW 229.6 billion. This loss nearly halves the matured principal of KRW 435.3 billion, with an average loss rate reaching 52.8%. In some products, the loss rate has even escalated to 56.1%. If the current trend continues, the loss rate is expected to reach 60%.
The sharp decline of the Hong Kong H-Index since 2021 has been identified as the main cause of these losses. To avoid principal loss in ELS, the H-Index in the first half of the year should maintain 65∼70% of the level in the first half of 2021. However, the current situation makes this challenging.
In response, investors have raised their voices against financial authorities and sellers. On the 19th, the ‘Hong Kong ELS Victims’ Group’ held a press conference in front of the Financial Supervisory Service, demanding compensation from the sellers. The financial authorities are planning to conduct on-site inspections and investigate the potential mis-selling by the 12 main sellers of these ELS products.
Dual Insight Analysis:
Positive Investment Perspective:
- Crisis as Opportunity: The decline of the Hong Kong H-Index could present a potential buying opportunity. If the market has overreacted, causing the index to be undervalued, this might offer a chance for long-term gains.
- Diversification Strategy: The crisis emphasizes the importance of diversifying investments rather than concentrating on specific indices like ELS. This strategy can help mitigate risks associated with the volatility of specific markets.
Negative Investment Perspective:
- Importance of Risk Management: This situation highlights the need for risk management in investments. Investors should be aware of such risks and adjust their asset allocation to minimize potential losses.
- Preparing for Market Uncertainties: The sharp decline in the Hong Kong H-Index showcases global market uncertainties. This may increase interest in stable-yield assets like bonds or safe-haven assets like gold.
Disclaimer:
This article is provided for informational purposes only and should not be interpreted as any form of investment advice or financial consulting. Trend Hub News does not bear legal responsibility for the article’s content. While the information is based on reliable sources, it should be understood that market trends can change. All investment decisions should be made under personal responsibility, and this article should not be the sole basis for any investment decision. Consulting a professional before making significant investment decisions is recommended.