In recent years the term "negative interest rates" has seared itself into general linguistic usage. For a long time it looked as if returns on classic forms of investment with a repayment promise were on the way out. Now, though, the period in which savers, investors and businesses sometimes even had to accept discounts on their capital could be drawing slowly to a close. Even the yield from the 10-year Swiss government bond, which had notoriously remained stubbornly below the zero line, recently reached clearly positive terrain. The trailblazer is the USA, where the central bank is planning to increase interest rates in March, for the first time since the end of 2018, in the fight against rampant inflation. The focus is consequently turning to those stock market players which will profit from the sea-change in monetary policy. Alongside banks and insurers, they include shares from the energy sector.
Leonteq is seizing the momentum in these three sectors for an interesting new issue. The fintech company is using three sector benchmarks as the underlyings for a bonus certificate. In addition to the EURO STOXX Banks Index, they are the STOXX Europe 600 Oil & Gas Index and the STOXX Europe 600 Insurance Index. Breaking the underlying down by the individual stocks, the structured product is based on a total of 72 shares. These represent a European "who's who" of the relevant sector. In the EURO STOXX Banks, BNP Paribas, Banco Santander and ING Groep set the tone, the trio together accounting for more than a third of the benchmark. When it comes to performance, Banco Sabadell has recently come to the fore, with the share price of the Spanish big bank appreciating by more than 40% over the year to date. Sabadell attracted buyers with better-than-expected figures for 2021. High demand for mortgages in Great Britain helped the financial institution to a jump in profits. The management are now looking to achieve the target – actually set for 2023 – of an over 6% return on equity before the end of this year.
Zurich Insurance is also well on track. According to CEO Mario Greco, the insurance group could even exceed the targets announced for 2022. He believes strong growth is particularly possible in commercial business, thanks to rising premium rates and greater demand. Zurich Insurance published its figures for 2021 on 10 February (after this issue went to press). The Swiss insurance share was performing relatively strongly ahead of this date. Up 9.5% on the closing figure for the previous year, it was one of the top performers in the STOXX Europe 600 Insurance Index. Analysts continue to give the thumbs up to both Zurich Insurance and the sector as a whole. Looking at 2022, HSBC sees insurers being in a sweet spot. The experts attribute this positioning to a mix of strong solvency levels, growth in profits of 5% to 7% and attractive dividend yields. Traditionally, the energy sector can also score from high payouts. At present it is also profiting from the inflationary environment and rising oil prices. The STOXX Europe 600 Oil & Gas Index has consequently continued its upward trend over the last few weeks (see chart).
The new bonus certificate gives investors an opportunity to take a partially protected stake in the three sectors. The structured product would even benefit disproportionately from rising share prices. The participation factor is 200%. Performance is calculated on the basis of an equally weighted basket consisting of the EURO STOXX Banks, STOXX Europe 600 Oil & Gas and STOXX Europe 600 Insurance. On the other hand, the three underlyings are considered separately when it comes to the barrier. As long as no index falls to or below the threshold of 69% of the respective initial level, the certificate will repay at least a bonus level of 100% at the end of the term. The redemption increases as soon as the basket posts a gain at the final fixing. Should at least one underlying turn downwards and touch or fall below the barrier, however, the partial protection expires and the "worst of" principle applies. In this scenario the repayment would be determined by the sector index having the weakest price performance.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.
