The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Indeed, it is the only significant market in non-Japan Asia that has gained since the start of the year and the prospects for the rest of the year seem promising. To capitalise on this, banks up and down the street are now starting to structure participation certificates to track the market's rise.
In early June, Merrill Lynch launched a HK$700 million ($90 million) certificate programme linked to its Taiwan New Opportunities Index, which comprises a basket of stocks selected by its equity research team in Taipei, headed by Sophia Cheng. The index tracks four industry sectors: China-focused, consumer, financials and property or construction. The basket is reviewed twice a year.
Since the start of March, the index has risen 36.5%, compared to less than 5% for the MSCI Taiwan Index. "The Taiwanese economy stands on the cusp of renewed growth following a period of underperformance," says Maranda Wong, head of Merrill's financial products group and equity structured solutions group.
The five-year notes are plain delta-one products, meaning they are unleveraged, low-strike call warrants that provide close to one-for-one tracking of the underlying index. There are two varieties of the certificates, with different minimum investment amounts: HK$20,000 or HK$50,000. They both have a strike price of 0.001 and charge a 1% index calculation fee. Merrill will act as the market maker.
"Delta-one is a good way for retail investors to participate in the Taiwan growth story," says Warren Huang, head of Hong Kong warrant sales and a VP of the equity structured solutions group at Merrill. "It's transparent and liquid, and quite like a fund because these certificates benefit from our team of researchers. The advantage is that the cost is much lower."
Citi has also recently listed its own set of five-year Taiwan participation certificates in Hong Kong, tracking three sub-sectors of the Taiex index: building materials and construction, electronics and finance. The certificates offer a one-year fee waiver and charge 1% thereafter.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
Insto roundup: Norway's Oil Fund praises China governance efforts; NPS commits $100m to taxi-hailing app
Norway's Oil Fund welcome Chinese proposals improving transparency and shareholder protection; HK's MPF assets surge 35% year on year; Korea's NPS commits $100m to TPG consortium to invest in taxi-hailing app; Poba commits W270bn to European property; Malaysia's EPF sees investment income rise 59% year-on-year in first quarter, and more.