There is a focus on the US indexes emerging in the offerings this week, with the latest including several products that use the S&P 500 and Russell 2000 as an underlying. This trend comes as the dollar is strengthening and there is uncertainty about some of the emerging markets economies.
Following this theme, Bank of America has issued a principal-protected note on the Dow Jones Industrial Average. There have been less principal-protected notes issued over the past month or two, perhaps signalling returning investor confidence.
The Market Index Target-Term Securities Linked to the Dow Jones Industrial Average are four-year notes offering 100% participation in any upside of the index, capped at 27–31% with 100% capital protection at maturity.
A large amount of the latest issuance comes from HSBC, which is rare – the bank is one of the regular issuers but on a less frequent and smaller scale than other players. It has issued products with exposure to US equities through the main equity indexes, the S&P 500 and the Russell 2000, but it is also offering exposure to emerging market equities.
The bank has also issued a basket product, an increasingly popular product type for the US market. The Return Optimisation Securities with Partial Protection Linked to a Fund Basket provide exposure to funds tracking the US, European, Australian and Asian markets.
The one-and-a-half year product offers 200% participation in the funds, subject to a cap at 23.3%. There is a 90% barrier, after which capital will decline at the rate of 1:1.