Warrants Commentary (30 Jul to 3 Aug)
Last Wednesday (1 Aug), US President Donald Trump threatened to increase tariffs on USD200bil. worth of Chinese goods to 25%, more than double the tariff that was initially planned. The White House said that the proposed tariffs adjustment is intended to pressure China into changing its trade policies. China had again warned that it would retaliate if the US went ahead with the plan (1 Aug, BBC).
Last week, the Malaysian warrants market saw RM584.0mil. traded, 32.9% lower than the prior week. It was a bloodbath for the Hang Seng Index (HSI) last week, as it closed in the negative territory 5 days in a row, losing 1,128.0 points throughout the week to close at 27,676.3 points on Friday. Warrants over the HSI once again took up a large proportion of the warrants space, with RM460.4mil. traded last week or 78.8% of the total warrants market.
Among the HSI warrants, put warrant HSI-H4G (Sep 2018 expiry) topped the charts with RM94.6mil. traded as we saw massive profit-taking by investors throughout the week. The bid price of the put warrant gained 37.3% week-on-week (w-o-w) to close at RM0.810 on Friday, moving in an opposite direction to the underlying as the HSI futures fell throughout the week. Besides that, put warrants HSI-H4I (Oct 2018 expiry) and HSI-H4O (Jan 2019 expiry) were also actively traded, taking up the second and fourth spot on the top traded list, respectively. At the end of the week, investors net sold 16.2mil. and 11.1mil. units of these warrants, respectively. Meanwhile, bargain hunters who look to benefit from a rebound in the HSI were collecting HSI-C3O (Jan 2019 expiry) as the bid price of this call warrant closed 32.0% lower w-o-w to RM0.350 on Friday.
On the local front, Malaysian conglomerate DRB-Hicom Berhad (DRB) stole the limelight last week as its share price touched a three-month high of RM2.36 on Friday after the company announced it is selling their 97.4% stake in waste disposal management company Alam Flora to Malakoff Corporation for RM944.6mil. cash (2 Aug, the Edge Markets). Call warrant DRBHCOM-C58 (Jan 2019 expiry) was the top traded DRB warrant last week. The bid price of the warrant moved in tandem with DRB shares, gaining 15.1% for the week as the underlying rose 4.5% w-o-w.
Top 5 warrants by traded value:
|Issuer||Exercise level||Expiry date|
|HSI-H4G||94.6||Macquarie||28,600||27 Sep 2018|
|HSI-H4I||87.8||Macquarie||27,800||30 Oct 2018|
|HSI-C3O||64.4||Macquarie||31,200||30 Jan 2019|
|HSI-H4O||54.2||Macquarie||25,400||30 Jan 2019|
|HSI-C3I||41.7||Macquarie||30,000||30 Oct 2018|
To view the full list of structured warrants available on Bursa Malaysia, kindly visit malaysiawarrants.com.my.