The Bank Expands Investor Access to High-Leverage Financial Products
UBS has become the latest issuer of Daily Leverage Certificates (DLCs) on the Singapore Exchange (SGX), marking its entry as the second bank in Singapore to offer these products. Beginning Tuesday (Feb 15), UBS will list 10 new DLCs, which include both long and short positions with a fixed leverage of up to 7 times the daily performance of popular stocks and indices such as Tencent, Alibaba, Meituan, BYD, and the Hang Seng Index. These five DLCs were among the top 10 most traded on SGX in 2021, according to the exchange.
Winni Cheuk, UBS’s head of sales for public distribution in the Asia-Pacific region, explained that the bank has observed significant volatility in Hong Kong stocks, making this an opportune moment to introduce DLCs. She stated that this market environment allows investors, whether bullish or bearish, to gain greater exposure with lower capital requirements and a fixed daily leverage.
DLCs are leveraged financial instruments that allow investors to earn returns based on the daily price movement of an underlying asset, such as stocks or indices. With a product like a 7x DLC, if the underlying index moves 1%, the DLC’s value will change by 7%. However, it is important to note that DLCs carry a high level of risk, and only qualified investors can trade in these products due to their complex structure and features.
Currently, there are around 250 DLCs listed on SGX, which have collectively generated over S$10 billion in trades since the product’s introduction in July 2017. SGX was the first exchange in Asia to offer DLCs, enabling investors with specified investment product (SIP) qualifications to gain leveraged exposure to Asian indices at a fraction of the underlying asset’s cost.
Societe Generale was the first bank to offer DLCs in Singapore and Asia, launching its initial set of 10 products in 2017, including DLCs linked to the MSCI Singapore Index and Hang Seng Index.
As interest in DLCs continues to grow, SGX head of equities Michael Syn highlighted the increasing demand for products linked to US indices. UBS’s APAC head of public distribution, Vassili Reperant, noted that this move is a significant milestone for the bank’s retail structured product business in Asia, following the launch of its warrant business in 2008.
