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Mixed sentiments from HSI’s meltdown

Warrants Commentary (22 to 26 Oct)

Last week, the Hong Kong Hang Seng Index (HSI) spent almost an entire week in the red. The index started on the right foot, rising 2.3% to 26,153.2 points on Monday, but suffered a steep 3.1% decline the following day, as the short-lived rally in the Chinese market fizzled out. The HSI limped through the rest of the week, falling below the 25,000-level on Thursday and finishing the week down 843.8 points, or 3.3% week-on-week (w-o-w), to 24,717.6 points last Friday. The HSI futures correspondingly lost 3.3% w-o-w to end the week at 24,657.0.

As the HSI continued to decline, investors’ sentiments were mixed as they actively traded both the call and put warrants over the HSI throughout the week. The put warrant HSI-H4V emerged as the top traded warrant for the week with 221.0mil. units traded. Investors sold back 7.6 units of this warrant as its price rose 22.5% w-o-w to RM0.435, moving in an opposite direction to the HSI’s decline.

The call warrant HSI-C3X was the second most popular warrant with 158.8mil. units traded. Investors snapped up 17.6mil. units of this warrant over the week as they anticipated a rebound in the HSI. In total, investors net collected 59mil. units of HSI call warrants, causing 7 of them to be sold out, meaning the issuer is unable to provide an offer price for these warrants for as long as they remain sold out.  When this happens, there is a possibility that these warrants may be trading higher than the issuer’s fair price.

Meanwhile, a call warrant and a put warrant over the China A50 Index ETF (A50CHIN) also ended up in the top 10 list last week, as the A50CHIN rose 0.2% w-o-w to HKD12.30. Call warrant A50CHIN-C24 and put warrant A50CHIN-H23 saw 63.9mil. and 45.3mil. units traded, respectively. The underlying, A50CHIN, is designed to track the performance of the 50 largest A-share companies listed on the Shanghai and Shenzhen stock exchanges, as measured by the FTSE China A50 Index.

On the local front, call warrant over Hibiscus Petroleum (Hibiscus), HIBISCS-CI, was the top traded warrant over Malaysian shares, with 42.7mil. units traded. As Hibiscus shares declined 13.3% w-o-w, HIBISCS-CI’s price fell 41.7% w-o-w, with investors net buying 10.0mil. units throughout the week.

Top 5 warrants by traded volume:

Warrant name Volume
Issuer Exercise level Expiry date
HSI-H4V 221.0 Macquarie 22,800 28 Mar 2019
HSI-C3X 158.8 Macquarie 26,800 28 Mar 2019
HSI-C3W 158.3 Macquarie 28,200 28 Mar 2019
HSI-H4O 127.1 Macquarie 25,400 30 Jan 2019
HSI-C3V 114.0 Macquarie 29,600 28 Mar 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.