JPMorgan offers product linked to Dow components; to also price S&P-linked notes for Morgan Stanley

By Kenneth Lim

Boston, Jan. 8 - JPMorgan Chase & Co. was one of the more active issuers on Monday, offering a number of products including a one-year, 18% reverse exchangeable notes linked to the least performing common stock on the Dow Jones Industrial Average, a structure that gives investors exposure to the individual components of an index.

Meanwhile, JPMorgan will also be placing three-year annual review notes linked to the Standard & Poor's 500 Index for Morgan Stanley.

JPMorgan offers Dow-linked product

The exchangeable will pay a coupon of at least 18%, which will be determined at pricing. The exchangeable pays par upon maturity, unless any of the component stocks on the index falls below 40% of its initial reference price during the monitoring period and the cash value of the physical delivery amount of the least performing reference stock is less than $1,000. JPMorgan's stock will not be included as a reference stock.

Investors stand to lose part or all of their principal if any of the component stocks' common share price falls enough to trigger the payout reductions.

A structurer not involved in the offering noted that such deals offered a twist on index-linked products.

"Rather than take a view on the index as a whole, products like this give you individual exposure to every component on the index," the structurer said.

"There's obviously a lot of opportunities in terms of structure and protection for different risk appetites," the structurer said. "I'm not sure if many retail investors will have that kind of a risk appetite, but certainly more sophisticated investors who are willing to take a directional view will find such products interesting."

JPMorgan to price Morgan Stanley deal

JPMorgan will also be pricing an offering of three-year annual review notes linked to the S&P 500 Index for Morgan Stanley.

The notes will pay par plus the product of $1,000 and the applicable call premium, which increases by at least 8.71%-point increments every year.

This is not the first deal that JPMorgan and Morgan Stanley, usually rivals, will be collaborating on.

In November 2006, the two banks also had a similar deal, in which JPMorgan priced annual review notes linked to the Nikkei 225 and the S&P 500 on behalf of Morgan Stanley.

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