HSBC to price reverse convertibles on iShares MSCI Brazil fund, iShares MSCI Emerging Markets fund

By LLuvia Mares and Sheri Kasprzak

New York, Dec. 5 - HSBC USA Inc. announced plans to price two reverse convertibles linked to iShares MSCI index funds.

The bank plans to price 18.2% reverse convertibles linked to the iShares MSCI Brazil index fund and 15.75% reverse convertibles linked to the iShares MSCI Emerging Markets index fund.

The Brazil index fund-linked notes have a three-month term and pay par at maturity unless the shares fall below the 70% protection price during the life of the notes and finish below the initial price. If that should happen, the notes pay a number of shares equal to par divided by the initial share price.

Those notes are expected to price Dec. 7.

Similarly, HSBC will price 15.75% notes linked to the iShares MSCI Emerging Markets index fund.

Those notes also have a three-month term and also pay par at maturity unless the shares fall below the 70% protection price and ends below the initial price. The notes then pay a number of shares of the fund equal to par divided by the initial price.

Those notes also price on Dec. 7.

RBC to price notes linked to 20 stocks

Elsewhere, Royal Bank of Canada is gearing up to price an offering of direct investment notes linked to a basket of 20 stocks.

"It's certainly not the first time I've seen something like it but it is pretty innovative," said one market source not connected with the deal.

"The payout is certainly interesting. I think investors would be attracted to something like this because you're not depending upon the performance of just one reference stock. It's not overly complicated, which is probably good for investors. They have 20 stocks, so it's not so many as to be burdensome. That's probably as many as I would put in any basket though."

The notes are linked to equal weights of 20 reference stocks. The stocks include California Pizza Kitchen, Inc.; CKE Restaurants, Inc.; Genworth Financial Inc.; JPMorgan Chase & Co.; Amgen Inc.; Genentech, Inc.; Comcast Corp.; Qualcomm Inc.; Akamai Technologies, Inc.; Motorola, Inc.; Symantec Corp.; Dell Inc.; Pfizer Inc.; Career Education Corp.; Starwood Hotels and Resorts Worldwide, Inc.; AMR Corp.; TravelCenters of America LLC; Patterson-UTI Energy, Inc.; Alcoa Inc.; and Cemex SAB de C.V.

The one-year notes pay 97.5% times the principal amount times the basket change plus the basket dividend yield at maturity.

The basket change is the equal to the average of the percentage changes of each underlying stock, which is calculated by dividing the sum of the percentage changes for each of the underlying stocks by 20.

The basket dividend yield is equal to the sum of the dividend yields for each of the underlying stocks, divided by 20.

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