US Wrap: Resource-based investing remains popular

Resource-based investments have become a strong recurring theme in the US and Canada. The latest issuance offers products based on oil, gas and coal. Royal Bank of Canada has issued a reverse convertible based on the stocks of ATP Oil & Gas Corp.

Resource-based investing in Canada has tax incentives, as the government wants to encourage investment in its plentiful resources. "Being a resourced-based country and a huge land base, we don't have enough people to take care of resources. The government has allowed people to invest in the development of certain oil and gas and mining operations, and gives them (up to) a 100% tax write-off," explains Terry Wong, adviser at HSBC in Vancouver.

The notes issued by RBC are three-month investments paying an annual coupon of 21.75%. There is a 70% protection barrier, after which capital will depreciate at the rate of 1:1.

Swedish Export Credit Corp, one of a handful of regular non-bank issuers in the US, has re-joined the offering after a couple of months off the issuance scene. It has an accelerated growth product based on the EAFE Index.

The Equity Index-Linked Notes Linked to the MSCI EAFE Index are one-and-a-half year investments offering 150% of the upside of the index, subject to a cap of 31.5%–36%. There is no principal protection so any fall in the index will result in a loss of capital at the rate of 1:1.

Emerging markets remain a popular theme, with products based on the MSCI Brazil Index Fund and the MSCI Emerging Markets Index Fund also being issued.

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Source: FVC and SEC filings

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