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Chart 35: issuance of Korean structured products ticked up in Jul-16, but stays relatively low as majority of the products still haven’t knocked out 3500 -mamm KOSPI2 tenes HSCEI 9000 Korean structured product issuance increased to US$1.9bn in July: KOSPI2-linked products dominated 3.000 mmm SXOE mums SPX 8000 =@— Total issuance (RHS) L 7000 Korean auto-callable product issuance ticked up last month, 6000 with a total of USS 1.9bn notional issued, vs. USS 1.6bn total Pa issuance in June. 5000 = 4000 8 Looking at individual underlyings, KOSPI2-linked products 3000 (currently US$578mn) saw the largest increase. KOSPI2-linked _ issuance hence took over SX5E-linked issuance (currently USS$436mn), which was relatively unchanged compared to June. 1000 HSCEl-linked issuance (currently USS 69mn) further declined 0 whereas HSl-linked issuance (currently USS 262mn) increased SBDEREREBEEBSES again. SPX-linked issuance grew to USS 281mn. qoo27z7qanrwxusatass > ‘, KOSPI2 outstanding vega: US$23mn Source: BofA Merrill Lynch Global Research. HSCEI outstanding vega: USS74mn Chart 36: We estimate that structured product Issuers are currently long Chart 37: We estimate that structured product Issuers are currently long USS$23mn of KOSPI2 vega US$74mn of HSCEI vega 80 KOSPI2 Autocall Vega Outstanding Profile 100 HSCEI Autocall Vega Outstanding Profile wi 70 s 90 Lo?) Lo?) o o 80 > 60 > = = 70 ZB 50 —§ 60 2= 4 ge 0 x -8 40 22 30 oS a> 83> 30 2 g 20 ® 20 & 10 Eto £ & ka . oo Lu 2 CO CO CO CO Oo eB eee e @ Ge & oO oclcmWlClcOUlUcUcOUCUCUCUCchOKCUcCOUCUCcCWCUcCOUChOChUchOUOUchOUCUNUCUCO oo GO CO CO GO OG GO GO GO OG GO G&G G&G MNS OD OT nN OFT ODO OO bY © DD DOD moo wmcdwocdwoeodwoiwo G2 WOW —- TT TN NNN NN NN NN OM O om~ mn OO DD CO CO TF TN N OY KOSPI2 Spot Level HSCEI Spot Level Source: BofA Merrill Lynch Global Research. Source: BofA Merrill Lynch Global Research. Table 5: Volatility measures of major Asian indices (data as of 5-Aug-16) 3Mth ATM Implied Volatility 10D Realized Volatility 42Mth-1Mth ATM Vol Spread 3Mth 90-110 Skew Spread Equity Market Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly 4Yr Weekly Current change _ percentile Current change percentile Current change percentile Current change percentile return HS! 17.5% -0.6% 57.2% 15.7% 49% 56.4% 22% 0.3% 52.0% 5.4% 0.2% 82.8% 1.2% HSCE| 20.8% -0.5% 30.4% 174% 66% 38.1% 3.3% 0.2% 88.9% 42% 0.7% 175% 1.9% NKY 21.7% -1.1% 47 3% 19.2% 20% 46.2% 1.2% 3.0% 67.5% 5.1% 0.3% 15.9% -1.9% KOSPI2 12.6% -0.4% 15.4% 124% 11% 57.5% 3.9% 0.5% 15.6% 5.2% -0.7% 80.5% 0.3% ASX 200 14.3% 0.5% 60.1% 9.9% 47% 34.0% 2.1% 0.1% 64.2% 11% 0.0% 55.6% -1.2% NIFTY 14.2% -0.2% 6.3% 118% 29% 32.6% 2.6% 0.7% 38.4% 5.8% 0.6% 14.0% 0.5% TWSE 14.6% -0.3% 63.1% 10.2% 20% 37.2% 0.7% 1.0% 16.8% 41% -0.5% 63.5% 1.2% Source: BofA Merrill Lynch Global Research ; eee oct Bankot America 18 Global Equity Volatility Insights | O09 August 2016 Merrill Lynch HOUSE_OVERSIGHT_025995