NKY Uridashi monthly issuance slightly picked-up in May-17 With NKY breaking above 19,500 in May and triggering some early knock-outs, Japanese Uridashi issuance picked up towards the end of May to US$630mn. We estimate there is now around US$7.9bn (vs. $8.1bn last month) in product outstanding and over 50% of it will be knocked out if the NKY rallies above 20,500. We estimate issuers are currently long US$44mn vega in NKY. The peak of the vega profile is around the 17,500 level and we expect issuers to lose US$2mn of vega for every 1% rally in the NKY. Chart 42: Korean auto-callable issuance fell 21% to US$3.6bn in May- 17; Issuance in KOSPI2-linked products (rose from US$840mn to US$846mn) remained steady; HSI-linked products fell 66% from US$360mn to US$120mn as investors prefered HSCEI-linked products (which only fell from US$760mn to USS700mn) mmm KOSP|2 soem HSCEl mmmmSXSE mame SPX HS| mm NKY =Total issuance (RHS) 3,000 8,000 2,500 7,000 6,000 s 2,000 5,000 = a 1,500 4,000 a > 1,000 3,000 3 2,000 ano 1,000 — ee eee’ we’ 2 w' ee 2s 2 eee eee eer rr ee PESPES SEER ER EES EEE R ERE EG Source: BofA Merrill Lynch Global Research. From May-15 to May-17 Chart 43: Knock-out schedule for legacy HSCEI-linked products issued in Chart 44: In May-17, there was $630mn of Uridashi products issued 2015; we expect more knock-outs in Jul-17 if HSCEI stays above 9,600 which were NKY linked 1.6 22,000 14,000 14 mame New NKY Linked Uridashi issuance 31.000 12,000 411,024 1491 41,341 —_ % 212 NAY Ing} 20,000 9,665 = i. ' 10,000 % 10 19,000 8,000 y 08 { 18,000 . 6,000 S 06 | i! 17,000 | F win i 00 3,582 fm 3947 3,165 fa 3.261 2 04 | ll | 16,000 02 4NUIt] 15,000 2,000 iy Al , 2 oe 8 _ die 14,000 - = = = = = = we we Jun-17 Jul-17~— Aug-17.- Sep-17 Oct-17“ Nov-17 S ® 2 S&S &® & §& ® ~ Ss a) ~ Ss a) ~ Ss m Average HSCEI Knock-Out Level — = Notional (US$mn) Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17 Source: BofA Merrill Lynch Global Research. Monthly data from Jan-1