As the KOSPI index continues its box-range trading in the domestic stock market, bank-linked deposit products (ELDs) are gaining attention. These products guarantee principal and a certain level of return while offering additional gains if the stock index moves within a specified range. Some products have even been launched with annual returns as high as 11%.
According to financial sector data on the 25th, the KOSPI has been fluctuating around the 7,000-point level recently. As stock price volatility has decreased, the KOSPI 200 Volatility Index (VKOSPI) has also fallen from its July peak to the low 40s.
Among these, ELD products that offer additional returns linked to stock index movements are drawing attention. ELDs are deposit products where interest rates are determined by the movement of underlying assets such as stock indices. As principal-guaranteed deposits covered by deposit insurance, investors can receive both principal and interest according to agreed terms if they hold the product until maturity.
Most products feature a structure where returns increase when the index moves within a certain range. However, depending on the product, a knock-out condition may apply that locks in returns early if the index exceeds or falls below a specific threshold.
Shinhan Bank has launched 'Safe Index-Linked Deposit 2619', a product linked to the KOSPI 200 index. It is available for subscription from September 22 to October 6. The product guarantees a minimum annual return of 3.30%, and if the index remains within 25% of the reference index until maturity, investors can earn up to an annual return of 5.45%.
If the index rises more than 25% above or falls below the reference index at any point after subscription, the minimum annual return of 3.30% will be locked in.
Hana Bank's 'Index Plus Fixed Deposit No. 26-17' guarantees a minimum annual return of 2.70% and offers up to an annual return of 11.50% depending on the index's performance. Subscriptions are open from the 11th to the 29th of this month. If the index rises or falls more than 40% above or below the reference index during the subscription period, the minimum annual return of 2.70% will be locked in.
Conversely, if investors wish to avoid early lock-in due to index fluctuations, they can choose stable-type products without knock-out conditions. Banks are offering both stable and return-seeking types of ELDs.
However, investors should not subscribe to ELDs based solely on the maximum return rate. They must verify the underlying assets, the method for calculating returns based on index fluctuations, and any knock-out conditions. Additionally, early withdrawal may result in receiving less than the agreed return, so it is advisable to invest funds that can be held until maturity.
A representative from a major bank stated, "ELDs are products that seek to preserve principal while also providing opportunities for additional returns based on market index movements." They added, "Especially in situations where market direction is unclear, these products can be utilized by customers who wish to reduce volatility risk when constructing portfolios alongside stable assets such as deposits."
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