Merrill prices $235 million notes linked to Nikkei, Mitts linked to global indexes

By Sheri Kasprzak

New York, Aug. 9 - Heading up structured products news was a $235 million offering of zero-coupon Accelerated Return Notes linked to the Nikkei 225 from Merrill Lynch & Co., Inc.

"As the [U.S.] dollar continues to decline and as [U.S.] stocks drop, investors really are looking to foreign equities," said one market source. "Japanese stocks are a good place to look. The Nikkei has long been a popular choice and now seems like a good choice."

The notes pay par plus triple any increase on the index, capped at $13.075 per $10.00 unit, as long as the ending level is greater than the initial level.

If the ending level is less than or equal to the initial level, the investors receive par at maturity.

The notes have a 14-month term.

HSBC's Asian index-linked CDs

Another investment bank, HSBC USA, Inc., announced plans on Thursday to price a certificate of deposit linked to a basket of Asian indexes, including the Nikkei 225.

The basket also includes MSCI Taiwan, MSCI Singapore Free and Hang Seng China Enterprises indexes.

The notes have a five-year term and are principal protected.

HSBC will sell the notes through LaSalle Financial Services, Inc.

One market insider said Thursday that CDs in general are of interest to investors because of FDIC insurance and the commonality of them.

"Investors like them and so that's why they're out there," he said. "You want to provide what the investor wants."

Merrill prices Mitts

In other news at Merrill, the bank priced $85.5 million in Market Index Target-Term Securities linked to a basket that includes the S&P 500, the Dow Jones Euro Stoxx 50 and Nikkei 225 indexes.

The Mitts have a 47-month term and pay par times the ending basket value minus the starting value divided by the starting value, multiplied by the 105% participation rate, assuming the ending value is greater than the starting value.

If the ending value is less than the starting value, the investors will receive par at maturity.

The basket was set at 100 on the pricing date.

Index performance

The Nikkei 225 closed the day up Thursday 141.32 at 17,170.60 and the S&P 500 settled down 44.40 to close at 1,453.09.

The Dow Jones Euro Stoxx 50 index ended the day down 89.04 at 4,275.18.

Merrill's currency-linked notes

Elsewhere, Merrill negotiated the terms of a $57 million offering of principal-protected notes linked to a basket that includes the Korean won, the Russian ruble, the Singapore dollar and the Chinese renminbi.

The 18-month notes pay par multiplied by a 163.1% participation rate times the ending value minus the starting value divided by the starting value, assuming the ending level is greater than the starting level.

If the ending value is less than the initial value or is unchanged, the payout at maturity is par.

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