Hong Kong surpasses South Korea in structured note boom: JPMorgan

A SURGING Hong Kong market has led to a boom in structured products linked to the city’s equities, so much so that it’s overtaken issuance from Japan and South Korea, according to JPMorgan Chase.

Structured products tied to the biggest single stocks listed in Hong Kong, including Alibaba Group and Tencent Holdings, have emerged as the “new anchor” of regional volatility supply, “significantly” outpacing index-linked issuance this year, strategists including Tony Lee wrote in a note dated Friday (Nov 7).

In 2025, the instruments supplied around US$11 million of vega – sensitivity to changes in the implied volatility of the underlying asset – per month, almost triple the level from 2024.

China’s policy pivot last year revived investors’ interest, with elevated volatility at the single-stock level and the artificial intelligence frenzy together leading to more demand for accumulation and equity-linked yield products, according to the note. Meanwhile, regulatory tightening and stricter investor protection standards in Japan and South Korea helped curtail issuance in those markets.

“Volatility supply in Asia has shifted toward Hong Kong,” the strategists wrote, noting that Alibaba, Tencent, Meituan, Xiaomi and BYD are the core underlying names for structured products issuance. “Dealers’ vega positioning across these stocks currently sits near peak exposure levels, suggesting large rallies or declines in spot prices could influence volatility flows.”

JPMorgan also noted that the growth in single-stock issuance has affected regional volatility dynamics, primarily boosting dispersion trades, where investors are long single-stock volatility and short index volatility.

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The strategists expect the momentum to continue in 2026, with the top stocks offering liquidity depth, investor familiarity and exposure to key investment themes. Newer listings and recent index additions such as Contemporary Amperex Technology and Pop Mart International may “modestly broaden the base”, the strategists said.