Merrill prices $12.74 million in notes linked to Asian index basket

By Sheri Kasprzak

New York, June 20 - Merrill Lynch & Co., Inc. led structured products news on Wednesday with another offering of return enhanced notes linked to five Asian indexes.

The offering is the second of its kind in as many weeks.

Sources at Merrill did not immediately respond to requests for comment on the two deals.

Market sources not related to the offerings have said this week that structured products offerings linked to Asian indexes and currencies have been very popular recently.

"Basically, you just look at the historical [index levels]," said one market source on Wednesday of how these indexes are chosen. "You want the ones that are expected to rise over the term of the note. You just monitor the indexes over a time horizon."

The basket linked to the most recent offering includes a 16.5% weighting of the Amex Hong Kong 30 index, a 22% weighting of the FTSE/Xinhua China 25 index, 29.65% of the Kopsi 200 index, 21.75% of the MSCI Taiwan index and a 10.1% weighting of the MSCI Singapore index.

The 14-month notes are being sold through J.P. Morgan Securities, Inc.

If the final basket level is greater than the initial level, the notes pay double the basket return with a 17% cap.

The notes are protected up to a 10% decline in the basket. The investors will lose 1.1111% of their investment for every 1% beyond 10% the basket declines.

Similar offering

On June 13, Merrill priced an $18.605 million offering of buffered return enhanced notes linked to the same indexes with the same weightings.

The notes pay double the basket return with a 15% cap if the final basket level is greater than the initial level. The notes are also protected up to a 10% decline in the index and investors will also lose 1.1111% for every 1% beyond 10% the basket drops.

"Those indexes will most likely improve over the term of the notes," said one market insider. "The payout seems pretty good considering the history of those indexes."

Index performance

The Amex Hong Kong 30 index ended at 1,015.83 on June 12, at 1,007.65 on May 11 and at 995.22 on April 12. On Wednesday, the Amex Hong Kong 30 gained 6.62 to close at 1,058.60. A month prior, the index was trading around the 1,025 level.

The FTSE/Xinhua China 25 index closed down 0.35 to close at 126.09 on Wednesday and a month before, on May 21, the index ended at 114.70.

The Kospi 200 closed down 2.46 to close at 226.58 on Wednesday. When the $18.605 million offering priced on June 13, the index closed at 218.59.

The MSCI Taiwan index closed at 294.072 on Wednesday and in the 275 range in mid-May. The MSCI Singapore index closed at 4,164.762 on Wednesday and around 4,000 a month ago.

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