Absa Capital, the Barclays-affiliated corporate and investment banking division of Absa Bank Ltd, is marketing the latest in a series of structured notes offering South African investors exposure to European markets.
The European Growth Basket 2014 – Issue 5 is a three and a half-year investment linked to the performance of a basket featuring the FTSE100 and the Eurostxx50 indices. Investors will receive enhanced participation (currently estimated at 190%) in any market growth upon maturity and any positive basket returns will be enhanced if the South African Rand has depreciated against the Pound Sterling, or reduced if the South African Rand has appreciated against the Pound Sterling over the investment term.
The effect of a rand appreciation versus pound sterling can never result in the overall investment return being a negative number and as such the capital is 100% protected, said the bank.
“The idea is very much born out of our Absa Wealth view that Europe and UK offer better relative value and upside potential than the US does – hence the combination.” said Ryan Sydow, head of retail distribution at Absa Capital. “The research is the primary drive, there after the pricing. Given this product has an average in feature – the level on strike is not that much of an issue. If this was not a “basket” trade but rather a “best of” then you’d be looking at important factors like correlation and then perhaps best of’s lends themselves more to sector plays as opposed to more general geographic index plays.”
Sydow also said that lookback options are looking “quite attractive” right now. “BNP are out with a product in that space, and we have a few ideas on the boil too,” he added.
According to SRP there are 157 products across the whole database linked to baskets comprising the Eurostxx50/FTSE100 combination with 142 sold in Europe, three in the USA, seven in South Africa and five in Canada.