The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Virtual real estate hits Asia

For a region that has had a long-term love affair with property, Asia’s first property derivative could mean the start of a beautiful new relationship. In February, ABN Amro and Hong Kong broker, Sun Hung Kai Financial executed Asia’s maiden property derivative based on Hong Kong residential properties.

Euromoney Liquid real estate March 2007 

Under the terms of the deal, ABN Amro, the effective buyer of the property, receives from Sun Hung Kai Financial an income stream equivalent to the change in the University of Hong Kong-Hong Kong Island Residential Price Index (HKU-HRPI) while Sun Hung Kai will receive from ABN Amro Hibor plus an undisclosed spread.

HKU-HRPI is a sub-index of a series devised and compiled by Hong Kong University.

"It’s a very robust index," says Philip Ljubic, a director in property derivatives at ABN Amro. "If it wasn’t I wouldn’t commit ABN Amro’s balance sheet to it."

The deal size is very small at around $13 million and the swap has a one-year maturity, referenced from December 2006 to December 2007. ABN acted as principal through its proprietary trading book, while Sun Hung Kai Financial is believed to have been acting as an intermediary for clients.

The effect of the property derivative between the two financial institutions is that ABN purchases high-end Hong Kong residential property and Sun Hung Kai Financial’s clients are sellers, although the transaction is a synthetic one.

"The biggest advantage of trading property derivatives is there’s no stamp duty and it’s much quicker to trade," says Ljubic.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?