Societe Generale SA is on pace to sell a record volume of structured notes tied to multiple assets in Asia, which is driving growth for the lender in the market.
The bank’s sales in the region of the so-called hybrid notes have jumped by about 50 percent this year from the first quarter in 2012 to the largest amount for any January-March period, Julien Lascar, regional head of distribution, said in a phone interview, declining to provide a total figure. Issuance last year more than tripled to a record in Asia, which accounts for more than half the lender’s global hybrid-note sales.
“In terms of popularity of the products, I think it’s growing,” Hong Kong-based Lascar said. “Asia is definitely outperforming the rest of the world.”
The notes spread risks across a mix of assets to pay annual coupons higher than 5 percent, he said. Low volatility in underlying markets is making it harder for issuers to create attractive terms using single instruments as smaller price swings reduce the value of options embedded in structured notes.
The investments provide “quite good risk management,” said Stephen Pau, senior portfolio manager at Veco Invest Asia Ltd. in Hong Kong, a wealth-management firm that buys structured notes. “You don’t have to do asset allocation yourself and you don’t have to keep abreast of markets.”
The Paris-based bank’s hybrid notes sold in Asia typically use two underlying assets, Lascar said. The lender has a pool of more than 30 pairs of assets, ranging from equities to commodities, after mostly using combinations of interest rates and currencies only in 2011, Lascar said. The latest additions to reference gauges include equity indexes for the European, Hong Kong, South Korean and Taiwanese markets, Lascar said. Among currencies, the yuan and Taiwanese dollar are gaining popularity, he said. Singapore, Taiwan and Japan are the largest markets for the products in Asia, with sales in Hong Kong catching up, Lascar said.
The situation in Europe remains a risk, he said. Lawmakers in Cyprus rejected a levy on bank deposits on March 19, raising concern that the debt crisis in the region may worsen. “If, for any reason, Europe was to show instability again, we know it will probably mean more questions from our investors about taking our name,” Lascar said.