Warrants Commentary (27 to 30 Aug)
Last week, the Hang Seng Index (HSI) finally escaped the 27,000 level as the index kick-started the week on a bullish note, jumping 2.2% to close at 28,217.3 points last Monday. The index continued its strong performance, surging 0.5% on Tuesday and Wednesday, before losing 1.9% on Thursday and Friday to finish at 27,888.6 points. Despite the short week in Malaysia, trading over HSI warrants remained popular, accounting for approximately 80% of the total warrants turnover.
There were 8 warrants over the HSI that dominated the top 10 most active warrants last week. Both calls and puts were actively traded due to increased volatility in the index. HSI call warrant HSI-C3Q (Jan exp) emerged as the top traded warrant with 211.7 mil. units traded. The bid price of HSI-C3Q gained 15.0% week-on-week (w-o-w), closing at RM0.650 on Thursday. Meanwhile, HSI-H4O (Jan exp) was the most popular put warrant with 87.7 mil. units traded. The HSI-H4O moved in an opposite direction to the underlying, falling 16.2% to finish at RM0.440 last Thursday. Investors net bought 12.4 mil. units of this warrant over the week.
Meanwhile, for Malaysian single stocks, Hibiscus Petroleum (Hibiscus) reported its 4Q18 results last Thursday. Its net profit surged 92% year-on-year (y-o-y) to RM203.7 mil. while its revenue gained a whopping 147.8% y-o-y. Hibiscus’ share price gained 7.7% on Monday and Tuesday but thereafter fell a total 12.7% to close at RM0.960 on Thursday.
Throughout last week, bullish investors expecting positive results were actively trading HIBISC-CG and HIBISCS-CI. HIBISCS-CG was the most active warrant over single stocks, recording a total trading volume of 38.2 mil. units, while HIBISCS-CI saw 29.7 mil. units changing hands. HIBISCS-CI will expire on 28 January 2019, which means it has a longer tenure than HIBISC-CG, which will expire on 31 October 2018. Investors should note that longer dated warrants generally experience slower time decay than shorter dated warrants, which can be translated to a lower level of gearing and risk (all other factors held constant).
Top 5 warrants by traded volume:
|Issuer||Exercise level||Expiry date|
|HSI-C3Q||211.7||Macquarie||29,200||30 Jan 2019|
|HSI-C3P||106.2||Macquarie||30,200||30 Jan 2019|
|HSI-C3S||98.5||Macquarie||30,400||27 Feb 2019|
|HSI-H4O||87.7||Macquarie||25,400||30 Jan 2019|
|HSI-H4I||45.8||Macquarie||27,800||25 Oct 2018|
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