Breaking point?

The spectacular growth of a narrow range of structured products instruments in Asia during the past three years has created large concentrations of same-way positions on dealers' books. Could potential hedging problems cause the house of cards to come crashing down and break Asia's buoyant equity markets? Are regulators concerned? Christopher Jeffery reports

Structured products based on equity, foreign exchange and interest rate underlyings form the backbone of Asia's financial derivatives markets. The contrast between derivatives trading desks in most of Asia's financial centre compared with the world's leading two financial hubs, London and New York, is dramatic.

In Asia, most staff are employed to cater to the demands of private and retail bank distributors for structured products - and the risks get laid off via warrants issuance or 'book axe'