NKY Uridashi monthly issuance slightly picked-up in May-17
With NKY breaking above 19,500 in May and triggering some early knock-outs, Japanese Uridashi issuance picked up towards the end of May to US$630mn. We estimate there is now around US$7.9bn (vs. $8.1bn last month) in product outstanding and over 50% of it will be knocked out if the NKY rallies above 20,500. We estimate issuers are currently long US$44mn vega in NKY. The peak of the vega profile is around the 17,500 level and we expect issuers to lose USS2mn of vega for every 1% rally in the NKY.
Chart 42: Korean auto-callable issuance fell 21% to US$3.6bn in May-17; Issuance in KOSPI2-linked products (rose from US$840mn to US$846mn) remained steady; HSI-linked products fell 66% from US$360mn to US$120mn as investors prefered HSCEI-linked products (which only fell from US$760mn to
USS700mn) mmm KOSP|2 oom HSCEl mmmmSXSE mame SPX HS| mm NKY =Total issuance (RHS) 3,000 8,000 2.500 7,000 6,000 = 2,000 5,000 = a 1,500 4,000 a > 1,000 3,000 5 2,000 ano 1,000 WwW Ww WwW WwW WwW WwW Ww WwW io) io) io) i<o) io) io) io) io) i<o) io) io) io) NM MN MN MN MN : SSSR 588 SP ERSESTSRSERERERSE Source: BofA Merrill Lynch Global Research. From May-15 to May-17 Chart 43: Knock-out schedule for legacy HSCEI-linked products issued in Chart 44: In May-17, there was $630mn of Uridashi products issued 2015; we expect more knock-outs in Jul-17 if HSCEI stays above 9,600 which were NKY linked 1.6 22,000 14,000 14 mame New NKY Linked Uridashi issuance 31.000 42,000 411,024 1401 14,341 ———NKY Ind = 12 20,000 10,000 % 10 19,000 8,000 y 08 18,000 . 6,000 S 06 | uf 17,000 | 4,000 = 04 mY 16,000 2,000 02 5,000 14,000 = = = 2 2 ad Pe re Jun-17 Jul-17~—Aug-17.- Sep-17 Oct-17“ Nov-17 S ® 8 S§ &® & §& ® ™ = Y ™ = Y ™ = m Average HSCEI Knock-Out Level — = Notional (US$mn) Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17 Source: BofA Merrill Lynch Global Research. Monthly data from Jan-15 through May-17 orice a Global Equity Volatility Insights | 06 June 2017.21
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