Wells Fargo to price CD linked to BRIC basket; currency basket seen strong even as index deals drop off

By Sheri Kasprzak

New York, March 21 - As Wells Fargo Bank NA is set to price certificates of deposit linked to a basket that includes the Brazilian real, the Russian ruble, the Indian rupee and the Chinese renminbi, a market source familiar with emerging markets said he feels the basket will remain popular at least for now. Index-linked offerings, however, are another subject.

"The economies of these countries are growing very quickly," he said. "That's good news if you're banking on their currency."

The bad news is that profits from corporations based in Indian, China, Brazil and Russia have dropped substantially in the past year.

"That means bad news for anyone looking to invest in stocks from these countries," he added. "It's also bad news if you want to invest in an index-linked note with stocks from these countries."

Wells Fargo's CD

Moving to that BRIC-linked CD from Wells Fargo, the three-year certificate of deposit is linked to equal weights of the real, the renminbi, the rupee and the ruble.

A market source familiar with the offering noted that the deal makes a lot of sense in that it delivers to the investors the ease and familiarity of a CD with the popularity of the BRIC basket.

"Investors want CDs because they're easy to understand," he noted.

He also noted that the FDIC insurance makes the CD even more appealing.

At maturity, the investors will receive par plus the greater of the basket interest, if any, and the minimum interest amount. The CDs do not earn interest before the stated maturity date. The basket interest will be equal to the product of the deposit amount of the CD, the participation rate and the final basket level minus the initial basket level, which will be equal to 100.

The CDs are set to price on March 23.

Merrill's ruble-linked notes

Related to the BRIC basket, Merrill Lynch & Co., Inc. announced plans earlier this week to price zero-coupon principal-protected notes linked to the Russian ruble/dollar exchange rate.

The one-year notes will price at par of $10.00. If the final exchange rate is greater than the initial exchange rate, payout at maturity will be par plus the percentage increase in the exchange rate multiplied by a participation rate expected to be between 120% and 160%. The exact rate will be determined at pricing.

Investors in the offering will receive at least par.

Merrill also has an Indian rupee-linked note set to price shortly with settlement in April and the firm announced another rupee-linked note Wednesday to price in March and also settle April.

The first deal will mature in June 2008, be principal protected and have a participation rate of between 535% and 565%, the second, also due June 2008, a participation rate of between 470% and 510% with a maximum return capped at between $11.41 and $11.53.

ABN Amro prices reverse exchangeables

Elsewhere in the market, ABN Amro Bank NV said Tuesday it plans to price 20% Knock-In Reverse Exchangeable Securities linked to the worst-performing common stock in the Dow Jones Industrial Average.

The one-year notes pay par at maturity unless any of the stocks making up the DJIA falls below the 70% knock-in level during the life of the notes and finishes below the initial share price. At that point, the payout will be $1,000 divided by the initial share price of the worst-performing stock.

That deal is set to price April 13.

The offering was announced the day before the stock market rallied with the Dow gaining 159.42 to end at 12,447.52. The Nasdaq composite index gained 47.71 Wednesday to close at 2,455.92 and the Standard & Poor's 500 composite index climbed 24.10 to settle at 1,435.04.

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