Bear Stearns has recently started marketing in Asia a capital guaranteed structure linked to the performance of a basket of water-related companies. "The [United Nations] has issued a report highlighting the severity of water shortages. The demand for clean fresh water will double in the coming 20 years," said Edward Ho, senior managing director in Hong Kong. "This is something investors are taking notice of."
The U.S. house is structuring the notes on a basket of six water stocks from Europe, the U.S. and Japan, for high-net-worth clients in the region. With principal protection and a maximum maturity of three years, quarterly coupons accrue each day all stocks are above a designated strike, such as 85% of the original values. The coupons, with the first coupon guaranteed, have a maximum potential of 12% per annum. Additionally, the structure may be called early at each quarter after the initial quarter if all stocks are trading above 95% of the original levels.
