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HSI warrants heavily traded as index gained 2.4% w-o-w

Warrants Commentary (17 to 21 Sep)

Last week, the US-China trade war sharply escalated as the Trump administration announced that it is imposing another 10% tariffs on USD200 bil. worth of Chinese good, with effect today (Monday, 24 Sept). Following the announcement, the Hang Seng Index (HSI) fell 1.3% or 353.6 points to finish at 26,932.9 points on Monday. However, it rebounded 0.6% to finish above the 27,000 level to 27,084.7 points the following day, after the Chinese government retaliated by slapping the US with additional tariffs on USD60 bil. in US imports. The HSI continued to gain for the rest of the week, recording a week-on-week (w-o-w) gain of 2.4% to close at 27,953.6 points last Friday.

The HSI warrants, with a turnover of RM319.7mil. last week, remained the biggest contributor to the warrants market turnover, accounting for 79.0% of value traded. Call warrants over the HSI were heavily traded, recording a trading volume of 525.3M units. Most notably, HSI-C3Q emerged as the top traded warrant with 147.8mil. units traded. This call warrant tracked the underlying futures closely, rising 24.2% to close at RM0.565 ahead of the weekend. In view of the HSI futures’ 1.8% rise last Friday, investors took profit on 49.2M units of HSI calls and collected 22.4M units of HSI puts in one day.

Interestingly, A50CHIN-H17, a put warrant over the China A50 Index ETF, stole the limelight, coming in as one of the top 10 most actively traded warrants last week. Investors traded 48.7M units over the week and accumulated 378K units of A50CHIN-H17 last Friday. This warrant’s bid price plunged 35.3% w-o-w as its underlying rose 6.3% w-o-w.

Meanwhile, for Malaysian single stocks, the call warrant over Sapura Energy (SAPE), SAPNRG-C69, was the most popular warrant with 34.7M units traded last week. SAPNRG-C69 has an exercise price of RM0.550 and will be expiring on 25 April 2019, which means that this warrant has the longest tenure among all SAPE warrants listed on Bursa Malaysia. Warrants with a longer time to expiry 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).  SAPRNG-C69’s bid price fell 13.3% w-o-w as its mother share fell 6.6% w-o-w.

 

Top 5 warrants by traded volume:

Warrant name Volume
(’mil.)
Issuer Exercise level Expiry date
HSI-C3Q 147.8 Macquarie 29,200 30 Jan 2019
HSI-H4O 138.6 Macquarie 25,400 30 Jan 2019
HSI-C3S 87.1 Macquarie 30,400 27 Feb 2019
HSI-H4I 85.0 Macquarie 27,800 30 Oct 2018
HSI-C3P 62.0 Macquarie 30,200 30 Jan 2019

 

 

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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.

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