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Asia sees first long-dated OTC property derivative option
21 May 2008
| Goldman Sachs and Lehman Brothers Global Real Estate Group today sealed Asia first long-dated over the counter (OTC) property derivative option. The trade, based on the Hong Kong residential index compiled by Hong Kong University, enables one party to hedge their real estate holdings and the other to gain exposure to the market. "We're pleased to have executed this tailored option trade which is the first of its kind in the region. We view this as a key transaction in our risk management strategy for the real estate asset class which provides a relatively quick and cost efficient way to manage exposure," commented Mark Gabbay, Managing Director and Co-Head of Lehman Brothers Global Real Estate Group in Hong Kong. Since the launch of Asia's first property derivative in April 2007, there has been a slow but steady start to the market, with anecdotal evidence suggesting at least 15 derivative trades based on indices in Hong Kong and Australia. The United Kingdom boasts a multi-billion dollar derivatives trade, something that players on the Asian markets are keen to capitalise on. Broker of the Goldman Sachs and Lehman trade, Stephen Moore, Head - Asia Pacific Property Derivatives, GFI Colliers, says that "It's quite simply a questions education and awareness." The Asian markets are years behind the UK markets, of which the majority of buyers and sellers are large financial houses and institutional investors. Another issue hampering the growth of the market is the lack of commercial indices in the key Hong Kong and Singapore markets. "Compiling an index is not easy anywhere," says Kevin Swaddle, Head of Asia Pacific for IPD, the index compiler whose indices are the basis for 95 percent of property derivative trades globally. "In Hong Kong and Singapore, it is taking a while convince the larger local developers to pool their data." As Nick Brooke, Chairman, Professional Property Services, lamented on 14 May in an opinion piece in the South China Morning Post, "Not enough of the other major property owners have agreed to participate to enable IPD to press ahead with the feasibility study that would lead to an index." Despite this initial reluctance, Swaddle is optimistic. He points out that significant time and effort was required in Korea and Japan, where robust commercial indices now are available. "I would be disappointed not to see an active commercial property derivative market in Hong Kong and Singapore within three years." he says. Back to news page |
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ISSN 1994-9464
Key title: RFP magazine
Abbreviated key title: RFP mag.
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