JPMorgan sells $4 million notes linked to emerging markets index fund; Merrill plans gold-linked notes

By Sheri Kasprzak

New York, Dec. 12 - Jumping on the recent trend of emerging markets-related offerings, JPMorgan Chase & Co. priced $4 million in principal-protected auto-callable knock-out notes linked to the iShares MSCI Emerging Markets Index Fund Tuesday.

The offering is one of several emerging markets deals announced recently and one equity structurer says it's a trend - at least for now.

"It seems to go in cycles," he said Tuesday. "A few months ago, you saw a lot of EM offerings and it seems to be coming back into fashion.

"Every now and then, something happens and investors either lose interest or get skittish about emerging markets and they disappear for a while. Now it's hot again.

"When something negative happens in an emerging markets country, we're likely to see a lull again. That just stands to reason."

Note terms

The two-year notes JPMorgan priced Tuesday will automatically be called and investors will receive a fixed payment of $1,080 per $1,000 in principal if the share price trades above the knock-out level of $167.85, or 150% of the initial price, during the life of the notes.

If the notes are not called, the payout at maturity will be par plus double the return on the fund if the fund's share price does not rise above 125% of its initial price during the life of the notes. Otherwise, the payout will be par plus the positive return on the fund. Investors will receive at least par.

Goldman, HSBC also had deals

Recently, Goldman Sachs Group, Inc. sold $374.513 million in 0% notes linked to the MSCI Daily Total Return Net Emerging Markets Index.

Those six-month notes pay par plus any gain on the index at maturity. Investors are fully exposed to any losses on the index.

HSBC Bank USA Inc. plans to price Far East Opportunity point-to-point certificates of deposit linked to the MSCI Taiwan, MSCI Singapore Free, Hang Seng China Enterprises and Nikkei 225 indexes.

JPMorgan priced $3.85 million in 0% buffered return enhanced notes linked to a basket of emerging markets indexes recently. The basket included the Korea Stock Price 200, MSCI Taiwan, Amex Hong Kong 30, FTSE/Xinhua China 25 and MSCI Singapore indexes.

Merrill's gold-linked notes

Elsewhere in structured products news, Merrill Lynch & Co., Inc. announced its plans to price 0% accelerated return notes linked to the spot price of gold.

With speculation that gold prices may climb to as much as $1,000 per ounce in the next two to five years, a market source familiar with commodities said Tuesday that more gold deals with longer terms are likely.

"There's no doubt it's highly speculative," he noted. "There's no way to tell where gold is going. This past year, everyone was saying, 'Gold is going above $700 per ounce,' and it did, but not for long. Just because there's word out that gold is going above $1,000 per ounce doesn't necessarily mean it's going to stay there for an extended amount of time.

"Still, I think it's going to whet investor appetite for gold-related products."

Notes pay triple gain

The one-year Merrill notes pay par plus triple any gain on the price of gold with a cap of between $11.40 and $11.80 per $10.00 in principal. The exact cap will be set at pricing, expected later this month.

Coming up, Lehman Brothers Holdings Inc. plans to price 0% bullish principal-protected notes linked to gold prices.

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