HSCEI-linked ELS products see losses topping $30 mn

[Photo by Yonhap]

Equity-linked securities (ELS) tied to Hong Kong’s Hang Seng China Enterprises Index (HSCEI) and sold by Korean banks have caused damages exceeding 40 billion won ($30 million).

According to financial industry sources, the combined losses of HSCEI-tied ELS products at four major banks with the largest sale of the ELS products in question—KB Kookmin Bank, Shinhan Bank, Hana Bank, and NH Nonghyup Bank—were confirmed to be 40.3 billion as of Wednesday and are expected to continue to grow.

Based on the ELS sales figures at the four banks with the largest ELS sales compiled by Maeil Business Newspaper, the losses from HSCEI-linked ELS products will amount to 345.3 billion won in January 2024 alone if the index stays at 5450, with 11,020 investors facing losses. If this trend continues to the end of March 2024, losses are expected to hit 1.59 trillion won, affecting 45,151 investors.

Concerns about substantial potential losses from the ELS products have been raised since 2023, with the Financial Supervisory Service (FSS) already receiving over 1,000 complaints related to ELS losses. “We are receiving at least 30 to as many as 100 complaints related to HSCEI-linked ELS daily,” an FSS official said. The complainants mainly argue that they suffered significant damage due to the banks’ “mis-selling” of the products.

The FSS started on-site inspections of 12 banks and securities firms from Monday to examine their engagement in the alleged mis-selling. On Tuesday, FSS Governor Lee Bok-hyun told the press that the authority’s goal is “to reach a conclusion before the end of February or early March 2024.”