Warrants Commentary (5 Mar to 9 Mar)
Spotlight on Press Metal warrants
Warrant market activities quieted down last week with the overall warrants turnover down 18.0% to RM360.3M from RM439.1M a week ago. Hang Seng Index (HSI) warrants continued to lead the warrants space as traders were actively taking positions due to large swings in the HSI futures. Warrants over Press Metal Aluminium Holdings Berhad (Press Metal) were also popular last week, with investors trading a total of 86.9M units as the underlying was very volatile.
Southeast Asia’s largest aluminium smelting company, Press Metal, saw its stellar share performance come to an end after President Donald Trump announced that the US will impose a 25% and 10% tariffs on imported steel and aluminum, respectively. On Monday (5 Mar), Press Metal started the week in the red as its share price broke the RM5.00 mark, dropping 8.3% to close at RM4.97. On the same day, Press Metal issued a statement to clarify that there will be minimum impact from US tariffs as their exposure to the US market accounts for less than 1% of the group’s total revenue (The Edge Markets, 6 Mar). On Tuesday, the share price rebounded as much as 6.8% in early trade following the press release statement. The share price traded in the range of RM4.85 to RM5.20 for the following three days and finished the week at RM4.97 on Friday (9 Mar).
Call warrant PMETAL-C7 emerged the top traded warrant over Press Metal for the week, with 36.0M units traded. Bargain hunters took home 2.1M units and 2.9M units of PMETAL-C7 on Monday and Tuesday, respectively, but were seen selling back 0.6M units on Wednesday. On Friday (9 Mar), the bid price of the call warrant fell 35.5% week-on-week to close at RM0.10. Among all warrants over Press Metal listed on Bursa Malaysia, PMETAL-C7 has the highest exercise price of RM6.30. Warrants with a higher exercise price typically have a higher gearing level and a higher level of risk than warrants with a lower exercise price (all other factors held constant). This is because warrants with higher gearing tend to move in greater percentages than warrants with lower gearing.
In other news, the HSI futures also started the week with a lacklustre performance as global trade war concerns deepen, also following the implementation of tariffs on imported steel and aluminum by the US. On Wednesday, global indices were hit by Gary Cohn’s resignation as the top economic adviser under Trump’s administration. HSI futures could not escape the sell-down and loss 0.9% to close at 30,202 points on the same day. However, the HSI futures rebounded strongly in the following two days, ending the week in the green.
HSI warrants recorded a turnover of RM127.4M. The most popular HSI warrant was the HSI put warrant HSI-H2W as investors traded 114.4M units for the week. Due to high demand, this warrant remained sold out for the second consecutive week. Investors should exercise caution when trading a sold-out warrant as the issuer is unable to provide an active OFFER price. Investors should also note that in some circumstances the market BID price may be inflated as other investors may be bidding higher than the issuer’s bid price.
Top 5 Press Metal warrants by volume:
|Warrant Name||Volume(‘mil)||Issuer||Exercise Price (RM)||Expiry Date|
|PMETAL-C7||36.0||Macquarie||6.30||28 Sep 2018|
|PMETAL-C8||21.2||CIMB||6.00||30 Nov 2018|
|PMETAL-C6||11.2||CIMB||5.00||28 Sep 2018|
|PMETAL-C4||7.3||Macquarie||5.00||29 Jun 2018|
|PMETAL-C5||4.9||RHB||5.35||24 Jul 2018|
To view the full list of structured warrants available on Bursa Malaysia, kindly visit malaysiawarrants.com.my.
Provided for Malaysian residents information only. It is not an offer or recommendation to trade and is not research material. Past performance is not indicative of future performance. You should make your own assessment and seek professional advice.
Article by: Macquarie Warrants Malaysia