Record Investments in Structured Products
Rich Asian investors are investing a record amount of money in complex stock bets, including structured products linked to Hong Kong and Singapore equities. This investment has surged 80% this year, reaching over $200 billion, according to estimates from BNP Paribas SA, one of the top issuers.
Popular Investment Products
Two popular types of structured products are accumulators and fixed-coupon notes. Accumulators require investors to buy a set amount of underlying securities at a fixed price over regular intervals. Fixed-coupon notes offer regular, fixed payments that are usually higher than bond yields.
These products are particularly popular among wealthy investors in Asia, with over 60% of global sales coming from the region in the first seven months of 2025. China and Hong Kong are leading the way, with investors flocking to products linked to Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
Risks and Rewards
While these products offer a smaller maximum payout than stocks, they provide regular, fixed payments and embedded protection. However, the risks can be significant, with investors potentially facing steep losses if the market downturns. The Lehman Brothers collapse in 2008 and the Covid outbreak are examples of events that have handed investors significant losses in the past.
- Accumulators can force investors to buy underlying securities at above-market prices during downturns.
- Fixed-coupon notes can require investors to buy shares at a higher price than the current trading level or settle in cash at losses if the stock price drops below a certain level.
Artificial Intelligence Frenzy
The surge in demand for structured products is driven by the artificial intelligence frenzy in Asia, with investors flocking to products linked to Chinese AI names such as Alibaba and Tencent. The coupon offered by these notes can range between 10% and 20% annualized, higher than those tracking an index.
As the stocks rally, demand is surging. Alibaba shares have jumped nearly 90% this year in Hong Kong, while the Hang Seng Tech Index has risen 26% to end years of underperformance against US peers.
Investor Sentiment
Investors who buy these notes usually can accept the worst-case scenario, as they believe the stocks will eventually recover. However, the risks can be significant, and investors should be cautious when investing in these products. With the current market gains, risk taking and reinvestment are on the rise, and it's not uncommon for wealthy investors to take on leverage to boost bets and amplify returns.