Products ride Asian boom; Merrill prices S&P Asia 50-linked notes; Svensk sets terms on Elements

By Kenneth Lim

Boston, Feb. 6 - Barclays Bank plc's planned series of notes tied to the ability of Asian stock markets to outperform the United States is the latest structured product that underlines the increasing popularity of Asia-linked offerings, a wealth advisor said.

"I think it's less a function of the design of the structured products as it is a function of it's easier to sell what just did well," said Scott Miller Jr., managing director of Blue Bell Private Wealth Management LLC.

Asia-linked products on the rise

Miller explained that the strong performance of Asian markets has spurred the development of products tied to that region.

"One of the reasons we see so much popularity in Asian indexes and in some cases Asian currencies is we are seeing so much more interest in Asia ex Japan," he told Prospect News. "And one of the reasons we see so much interest is, that's what has done well the last couple of years."

Current Asia-linked deals include Barclays Bank's planned offering of zero-coupon 100% principal-protected outperformance notes due Nov. 27, 2013 linked to the performance of an Asian index basket relative to the S&P 500 index.

The basket consists of equal weights of the Hang Seng index, the MSCI Singapore index and the MSCI Taiwan index. The notes will pay par at maturity plus the amount, if any, by which the basket outperforms the S&P 500.

Those notes are expected to price on Feb. 25 and settle on Feb. 29.

Investors also see structured products as a less risky way of entering into those emerging markets, Miller said. China, for example, continues to be risky despite its strong growth the past several years, he said.

"India was like that for a while too," he said. "It was so hard to get into. But with exchange-traded funds available, for example, that's not as big of a deal as it used to be. You're starting to get into that in China. You can get into that part of the world that is considered higher risk at this time, and through structured products it's not as risky."

Miller said investors looking at Asia-linked indexes like features such as principal protection, "for people who want some protection in the more aggressive assets".

The problem from a wealth-management standpoint is that "what you're normally giving up is some flexibility," he said.

"In structured products, for the most part you want to hold it to maturity," he said. "You don't want to sell it too early, but maybe you have to wait a long period of time...and for most of them you have a lack of liquidity, so you don't have the ability to sell as much as you would like."

"The problem with structured investments is, there's so many nuances, some are really good, and some are really bad," he added.

Merrill links to S&P Asia 50

Another Asia-linked product was Merrill Lynch & Co.'s accelerated return notes linked to the S&P Asia 50 Index due April 6, 2009. The $46.15 million offering was announced Wednesday after pricing Jan. 31.

If the index finishes higher at maturity, the 14-month notes will pay par of $10 plus the product of $30 and the difference in the index level, capped at $12.775 per note. If the index finishes lower, the payout at maturity will be one dollar less for each 10 percentage points that the index is lower.

Svensk prices $500 million of Elements

AB Svensk Exportkredit finalized terms on one from its series of Elements products and announced another for a total of $500 million worth of structured notes.

The first series was $250 million of 0% Elements due Feb. 13, 2023 linked to the MLCX Biofuels Index - Total Return via agents Nuveen Investments and Merrill Lynch & Co.

The index is designed to provide a benchmark for the biofuels sector and for investment in commodities as an asset class. The index comprises futures contracts on physical commodities that are either biofuels themselves or feedstock commonly used in the production of biofuels.

At maturity, investors will receive par plus the index return, less an annual investor fee of 0.75% times the proportion of days elapsed.

The second deal is a planned $250 million of 0% Elements due 2023 linked to the MLCX Grains Index - Total Return, also through agents Nuveen and Merrill Lynch.

The index is designed to provide a benchmark for the grains sector. The index comprises futures contracts on four physical commodities: corn, soybeans, soy meal and wheat.

At maturity, investors will receive par plus the index return, less an annual investor fee of 0.75% times the proportion of days elapsed.

Both series will be listed on the American Stock Exchange.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.