HSBC offers four-year digital structure as financial underlyings prove popular

Leveraged return notes and reverse convertibles remain popular in the latest US public issuance, but HSBC is offering a digital structure with a long tenor and products linked to financials

More products using financials as underlyings

HSBC has maintained the run of extended maturities on offer in the US market with the registration of a four-year digital product on April 12 that pays out 34–40% as long as the underlying MSCI Emerging Markets Index remains above its initial level. Any increase in the index above 134–140% brings investors an additional 1%. No dividends are on offer and principal is at risk.

The bank also followed the trend for using financials as underlyings with its 1.08-year autocallable product linked to the performance of JP Morgan Chase shares. The investment offers fixed early returns if conditions are met on any observation date. The first chance is after six months, pays 105.5–107.5% and has a 95% downside protection barrier. HSBC also linked a reverse convertible to Itau Unibanco, while Bank of America was the underlying for a reverse convertible registered by Bank of Montreal.

Leveraged return notes continue to remain popular, exemplified by a 1.5-year investment from Wells Fargo that is linked to the iShares MSCI Eafe Index Fund and offers accelerated returns of 1.5 times the rise in the fund subject to an upside cap of 117–121% and an 87.5% downside protection barrier.

The remaining new supply included reverse convertibles from UBS, Royal Bank of Canada and Barclays Bank and leveraged return notes from Goldman Sachs (linked to the Russell 200 Index and the MSCI Eafe Index) and Bank of Montreal (based on the S&P 500).