Merrill Lynch launched as underwriter its second Hong Kong dollar equity-linked notes for Cheung Kong Holdings, the issuer of the notes. The product known as "Giant Notes" are linked to a basket of three blue-chip stocks -- HSBC Holdings, Hang Seng Bank Ltd. and China Petroleum & Chemical Corp. They have an investment period of two years and pay a guaranteed 6% coupon after six months.
A "profit lock-in mechanism" provides a potential minimum bonus of 10%, depending on the share price performance of the underlying shares. The notes also offer potentially unlimited upside returns.
The minimum subscription amount is HK$50,000. Subscription will be accepted until September 30, 2005.
The product works like this. If the closing price of all of the underlying shares is at or above 110% of the initial
price during the life of the notes, the "profit lock-in event" will occur. In this case, at maturity, the notes will be redeemed in cash at 100%, plus a bonus equal to the least-performing company performance. This bonus will be 10% at a minimum.
If the closing price of any of the underlying shares is at or below 80% of the initial price during the life of the notes, a "trigger event" will occur.
In the event where a profit lock-in event does not occur, the notes will be redeemed in cash at 100% of the principal amount upon maturity, plus a bonus equal to the least performing company performance either if no trigger event occurs or if a trigger event occurs but the final price of all the underlying shares at the end of the two years is at or above 100% of the strike price.
Only if a trigger event occurs, and the final price of any of the three underlying shares at the end of the two years is less than 100% of its strike price, will the notes be redeemed by physical delivery of shares of the least-performing company.
Distributors offering the notes include: Asia Commercial Bank, Bank of China (Hong Kong), Bank of Communications, Hong Kong Branch, The Bank of East Asia, Chiyu Banking Corp., CITIC, Ka Wah Bank, Dah Sing Bank, Hang Seng Bank, Liu Chong Hing Bank, MEVAS Bank, Nanyang Commercial Bank, Shanghai Commercial Bank, Sun Hung Kai Investment Services, Wing Hang Bank and Wing Lung Bank.
