Chart 35: issuance of Korean structured products ticked up in Jul-16, but stays relatively low as majority of the products still haven’t knocked out
3,500 -mmmmm KOSPI2 mann HSCEI 9000 3.000 Mmmm SX5E me SPX 8000 =@=— Total issuance (RHS) -_ 7000 6000 5000 = Qa 4000 B 3000 2000 1000 0 mo wW WwW WM WM Mm OO O OO O O © SEPESSREREEEE
Source: BofA Merrill Lynch Global Research.
Chart 36: We estimate that structured product Issuers are currently long USS$23mn of KOSPI2 vega
80 KOSPI2 Autocall Vega Outstanding Profile 70
60 50 40 30 20 10
Estimate KOSPI2 outstanding vega (US$mn)
Q —
o2ea90 0 YK oS S ~~ - A
Source: BofA Merrill Lynch Global Research.
Q Oo Oo CaO 0 CO N OO TF WO OO bh OO DOD OD N NN N OO
KOSPI2 Spot Level
Table 5: Volatility measures of major Asian indices (data as of 5-Aug-16)
Korean structured product issuance increased to US$1.9bn in July: KOSPI2-linked products dominated
Korean auto-callable product issuance ticked up last month, with a total of USS 1.9bn notional issued, vs. USS 1.6bn total issuance in June.
Looking at individual underlyings, KOSPI2-linked products (currently US$578mn) saw the largest increase. KOSPI2-linked issuance hence took over SX5E-linked issuance (currently USS$436mn), which was relatively unchanged compared to June. HSCEl-linked issuance (currently USS 69mn) further declined whereas HSl-linked issuance (currently USS 262mn) increased again. SPX-linked issuance grew to USS 281mn.
KOSPI2 outstanding vega: US$23mn HSCEI outstanding vega: USS74mn
Chart 37: We estimate that structured product Issuers are currently long USS74mn of HSCEI vega
100 90 80 70 60 50 40 30 20 10
HSCEI Autocall Vega Outstanding Profile
Estimate HSCEI outstanding vega (US$mn)
6500 7000 7500 8000 8500 9000 9500 0000 0500 1000 1500 2000 2500 3000
HSCEI Spot Level Source: BofA Merrill Lynch Global Research.
3Mth ATM Implied Volatility 10D Realized Volatility {2Mth-1Mth ATM Vol Spread 3Mth 90-110 Skew Spread Equity Market Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly Current change _ percentile Current change _ percentile Current change __ percentile Current change percentile return HSl 17.5% -0.6% 57.2% 157% 49% 56.4% 2.2% 0.3% 52.0% 5.4% 0.2% 82.8% 1.2% HSCEI 20.8% -0.5% 30.4% 174% 6.6% 38.1% 3.3% 0.2% 88.9% 42% 0.7% 17.5% 1.9% NKY 21.7% -1.1% 473% 19.2% 20% 46.2% 1.2% 3.0% 67.5% 5.1% -0.3% 15.9% -1.9% KOSPI2 12.6% 04% 154% 124% 711% 57.5% 3.9% 0.5% 15.6% 5.2% 0.7% 80.5% 0.3% ASX 200 14.3% 0.5% 60.1% 9.9% 47% 34.0% 2.1% 0.1% 64.2% 11% 0.0% 55.6% -1.2% NIFTY 14.2% 0.2% 6.3% 118% 29% 32.6% 2.6% 0.7% 38.4% 5.8% 0.6% 14.0% 0.5% TWSE 14.6% 0.3% 63.1% 10.2% 20% 37.2% 0.7% 1.0% 16.8% 41% 0.5% 63.5% 1.2% Source: BofA Merrill Lynch Global Research 18 Global Equity Volatility Insights | 09 August 2016 (pertain
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