For Asian investors, structured products never went away. According to Mark Wightman, vice president, APAC, SuperDerivatives, trading in the APAC region is often far more complex that London or New York.
Wightman used the example of a structured product called the accumulator. Infamous to many, the premise behind the product is that you were locked into buying a stock at a set price every month over a certain period, usually 12 months. In a rising market, this is a good deal. If you bought HSBC stock one of the most popular traded stocks in Hong Kong back in February, you would be pleased with your return. Understandably in the bear market of 2008, accumulators were quickly dubbed I-kill-you-laters.
What made these structured products interesting is that they were used by a majority of high net worth individuals, and that in the Asian market, the depth of investor understanding in structured products goes far deeper than in Western markets. Many private banks and family offices in London do not offer structured products to investors. In Hong Kong, it is common practice, and although many lost large sums of money, nearly all knew what they were getting themselves into. As a result, many have dipped back into the market. According to Wightman, the Hong Kong and Singapore markets move over USD100 million of these products a day.
Much of this is not only down to the sophistication of the investors, but also due to the reaction of the Hong Kong and Singapore regulators. The structured products now come with health warnings, and after the collapse of Lehman Brothers, the regulators quickly stepped in and helped the settlement process. Compare this to London, where many are still locked in legal battles regarding assets locked into Lehman.
Although in many respects the Asian market is simpler long/short trades make up most of the trading volume the willingness of investors to get back into structured products although aware of the risks, highlight that not all structured products are purely bad news (despite their monikers), and that the Asian market is far different that its Western counterparts.