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Structured Products to Gain Interest in Korea Korea Times By Cho Hyung Kwon October 19, 2004 The low interest environment is expected to trigger more interest in structured finance products such as synthetic collateralized debt obligations in Korea, an international financial service company said Tuesday. During the Korea Finance and Capital Markets Conference organized by Euro Events and sponsored by The Korea Times, Sam Pang, vice president at Fortis Bank, said that there will be more opportunities in Korea for new investment products to gain the interest of institutional and retail investors. ``CDOs were exotic products in other Asian countries just a few years ago. But now they are no longer exotic and are regular investment vehicles,” he said in an interview with The Korea Times. Collateralized debt obligations (CDOs) are structured fixed income securities with cash flows linked to the performance of debt instruments and are usually securitized in pools of generally non-mortgage assets. ``The impression of Korean clients is that they are pretty sophisticated and they have seen these kinds of products before, so CDOs will not be something new,” he said. ``But how the regulatory authorities view the market and continuous education of clients are important. Also the investment culture has to change so investors are not only looking for equity and bonds. There are other ways to make money,” Pang added. ``Currently Korea is not a big market, but in about three years, we can expand and there and will be good opportunities in Korea,” he said. In Korea, the main clients of Fortis Bank’s products are insurance companies and a few banks. Richard Brauge, director at the bank said that the development of the synthetic CDO market will bring additional liquidity and believed that the Asian market including Korea was promising on increasing demand. ``A low interest rate will enable local investors to take large interest. Structured products are the answer to many institutional investors and will help them overcome the constraints of the global economic environment,” he said. Pang also believed that the large participation of retail investors in the local derivatives market was a good sign and structure products could prompt them to become involved in other risk participation opportunities. Other participants of the conference included Choi Joong-kyung, director general at the Ministry of Finance and Economy, Min Kyung-dong, executive director at Korea Asset Management Corporation and Huh Chan-guk, director at Korea Economic Research Institute. Choi said that he expected the Korean economy to improve despite the weak domestic demand as investment was improving, while the continuing strong external sector has been the key to Korea’s solid economic performance. ``As part of measures to help the Korean economy and financial markets to leap forward, we plan to deepen and widen the scope of capital markets, strengthen the role of public funds and pension funds, provide longer-term fixed income instruments and introduce a corporate pension system in 2006,” he said at the conference. ``The government will also focus on privatization and help the financial sector become more vigorous. We plan to introduce a new regulatory environment and ease regulation on asset management and help bring the domestic asset management industry to the globally competitive level,” Choi added.