From The Economic Times (India).
As the tides have turned, many well-heeled investors are moving out of stocks to park some of their money in structured products which are linked to leading market benchmarks.
Structured products, offered by banks and brokerages, have taken off in the last two years. But now with the Sensex having lost over 5,000 points from its peak, securities houses are sensing a greater demand for such products in the last few months.
A foreign bank recently offered a 15-month tenor product with a Nifty participation of 160-170%, with a knockout barrier of 20%. Standard Chartered was the first to introduce a “cliquet” structure, wherein investors “lock-in” profits earned in each year. Given the way that markets are behaving, bankers are tweaking products.
Earlier products which participated on the upside found favour with investors, but today products which participate the market upside as well as the downside find appeal. Hence, popular structures today have a 20-30% participation on both the upside and downside, with tenures of 18-24 months.
Today banks like Citi, HSBC, Standard Chartered and private sector players such as ICICI, HDFC and brokerages such as Emkay, Motilal Oswal, Edelweiss sell these products to their high net worth clients.
The minimum ticket size for these products is Rs 10-20 lakh. “A lot of HNI clients who do not want to risk their capital and want a slice of capital market returns opt for capital-guaranteed products,” says Abhay Aima, group head, Private Banking and Third Party Products, HDFC Bank.
For full article from The Economic Times (India), click here.
SPA-2008
Sunday, June 22, 2008
MSNBC: Energy Speculation Lead to Obama's Call to Close "Enron Loophole"
Obama campaign's said today that he plans to ease the impact of rising gas prices by cracking down on excessive energy speculation through closing the so-called “Enron Loophole.”
Aides argued the changes to the regulatory structures could have at least some medium-term impact on gas prices. The “Enron Loophole” -- so named because it was added at Enron’s behest -- has kept the Commodity Futures Trading Commission from fully overseeing the oil futures market and investigating cases where excessive speculation may be driving up oil prices, the campaign explained in a policy paper.
Obama would close the loophole by requiring that US energy futures trade on regulated exchanges. His plan also calls for legislation that would direct the CFTC to investigate whether further regulation is needed to end excessive speculation in US commodities markets, including higher margin requirements and position limits for institutional investors.
Obama would aim to ensure that US energy futures cannot be traded on unregulated offshore exchanges and would seek to work with our other countries to establish regulations to avoid excessive speculation in commodities futures markets. He would also call on the Federal Trade Commission to investigate market manipulation, including in the oil futures markets and ask the Justice Department to investigate whether energy traders have been engaged in illegal activities that have helped drive up oil and food prices.
Corzine said high oil prices were partly a result of increased demand from countries like China and India, but that most experts believed speculation was also a contributing factor and that the volatility in the price of oil on a daily basis was a clear indication of speculation in the marketplace.
“I think everyone believes there’s too much speculation in the oil markets and a lot it flows directly from that particular loophole,” he said. “"It might as well be called the Phil Gramm loophole, because it was snuck in at the 11th hour, 59th minute to the 2000 energy policy bill, and it just is, it really needs to be addressed. And it would have a lot of impact I think certainly in the intermediate term, if not in the short term with greater oversight here.”
Corzine said the "Enron loophole” Gramm had added to the bill took exchanges and derivative oil contracts out of supervisory oversight and had been a problem in electricity markets in California a few years ago. He said it was unlikely Gramm would push back against his own amendment.
For the full report, click here.
Aides argued the changes to the regulatory structures could have at least some medium-term impact on gas prices. The “Enron Loophole” -- so named because it was added at Enron’s behest -- has kept the Commodity Futures Trading Commission from fully overseeing the oil futures market and investigating cases where excessive speculation may be driving up oil prices, the campaign explained in a policy paper.
Obama would close the loophole by requiring that US energy futures trade on regulated exchanges. His plan also calls for legislation that would direct the CFTC to investigate whether further regulation is needed to end excessive speculation in US commodities markets, including higher margin requirements and position limits for institutional investors.
Obama would aim to ensure that US energy futures cannot be traded on unregulated offshore exchanges and would seek to work with our other countries to establish regulations to avoid excessive speculation in commodities futures markets. He would also call on the Federal Trade Commission to investigate market manipulation, including in the oil futures markets and ask the Justice Department to investigate whether energy traders have been engaged in illegal activities that have helped drive up oil and food prices.
Corzine said high oil prices were partly a result of increased demand from countries like China and India, but that most experts believed speculation was also a contributing factor and that the volatility in the price of oil on a daily basis was a clear indication of speculation in the marketplace.
“I think everyone believes there’s too much speculation in the oil markets and a lot it flows directly from that particular loophole,” he said. “"It might as well be called the Phil Gramm loophole, because it was snuck in at the 11th hour, 59th minute to the 2000 energy policy bill, and it just is, it really needs to be addressed. And it would have a lot of impact I think certainly in the intermediate term, if not in the short term with greater oversight here.”
Corzine said the "Enron loophole” Gramm had added to the bill took exchanges and derivative oil contracts out of supervisory oversight and had been a problem in electricity markets in California a few years ago. He said it was unlikely Gramm would push back against his own amendment.
For the full report, click here.
UK Guardian: Protected Plans "Don't Set My Pulse Racing"
Structured investment plans
"These each-way bets don't set my pulse racing," says the Guardian's Paul Farrow
They don't have the sexiest name, but that is not stopping investors from lapping them up.
Structured investment plans, which are linked to stock market indices or a basket of shares and guarantee either full or partial capital protection, often prosper during times of uncertainty. And with the all the gloom and doom, they are enjoying a boom. They are on course for a record year in terms of sales.
This comes as no surprise. Providers will always try to cash in on the prevailing mood of investors. And, boy, are they cashing in.
Whether they are linked to agriculture, Africa, China or even bombed-out banking shares, new structured plans are coming thick and fast.
I'm sure that many investors will be tempted by the latest offering from James Hay, which is a five-year plan linked to four banking shares with full capital protection - although HBOS is not one of the four. But investing in structured products is a little like betting on a horse race with an each-way wager and ending up with a second or third placed win, rather than a victory. And the trouble with an each-way bet is that, with a tinge of regret, you are often left thinking of what might have been – and whether the smaller win was worth the effort in the first place.
For the full article, click here.
"These each-way bets don't set my pulse racing," says the Guardian's Paul Farrow
They don't have the sexiest name, but that is not stopping investors from lapping them up.
Structured investment plans, which are linked to stock market indices or a basket of shares and guarantee either full or partial capital protection, often prosper during times of uncertainty. And with the all the gloom and doom, they are enjoying a boom. They are on course for a record year in terms of sales.
This comes as no surprise. Providers will always try to cash in on the prevailing mood of investors. And, boy, are they cashing in.
Whether they are linked to agriculture, Africa, China or even bombed-out banking shares, new structured plans are coming thick and fast.
I'm sure that many investors will be tempted by the latest offering from James Hay, which is a five-year plan linked to four banking shares with full capital protection - although HBOS is not one of the four. But investing in structured products is a little like betting on a horse race with an each-way wager and ending up with a second or third placed win, rather than a victory. And the trouble with an each-way bet is that, with a tinge of regret, you are often left thinking of what might have been – and whether the smaller win was worth the effort in the first place.
For the full article, click here.
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