Securities and Futures Commission data on an explosion of structured note offerings in the past two years and figures from the Hong Kong Investment Funds Association (HKIFA) on an implosion of interest in guaranteed funds might prompt investors in bank shares to go back to their valuation exercises.
First to the SFC, which included in its Quarterly Bulletin released last week a report on structured note sales.
Over the two-year period from June 1, 2003 to June 1, this year, researchers Joseph Lee and Veronica Chang noted a total of 118 retail structured notes were issued by 23 issuers. The aggregate issue size was $27.34 billion, the average issue size $232 million.
While both issue numbers and sizes had grown strongly since the third quarter of 2003, that growth rate now appears to be stabilising.
No longer-dated historical comparatives were available from the SFC and the survey was the first of its kind. But judging from statements in the annual reports of banks over the same period - replete with references to big jumps in profit contributions from wealth management products - it is fair to say structured notes went from famine to feast over the past few years.
Where continued sales are now bound will depend partly on where interest rates are headed. But it is a safe bet that the rise in rates that got underway this year has already had something to do with putting the lid on those erstwhile explosive growth rates in structured note issues - a suggestion reinforced by the SFC data taken over the two-year period.