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Warrants over GENM traded up a storm

Warrants Commentary (26 Nov to 30 Nov)

Last week, the trading value of structured warrants increased by 10.4% to RM410.8mil. for the week as a result of active trading in warrants over Genting Malaysia (GENM).  The share price of GENM took a beating last Tuesday as its planned Century Fox World theme park hit a brick wall, potentially creating a setback in GENM’s efforts to increase visitors numbers.  The share price plunged 16.7% or RM0.60 to close at RM3.00, and fell an additional 5.3% to RM2.84 on Thursday, before rebounding slightly to end the week at RM2.88.

Among all warrants over GENM listed on Bursa Malaysia, GENM-C42 was the most active last week with 50.9mil. units traded.  Though the issuer of this warrant had widened the offer price, investors were still actively buying this warrant as it fell 47.6% on Tuesday to close at RM0.055.  It is important to exercise caution when trading warrants with a wide-offer spread as the warrant’s price movement may not accurately reflect the underlying share’s price movement.

Warrants listed over the iShares FTSE China A50 ETF (A50 ETF) were also heavily traded, representing up to 15.6% of total warrants turnover.  The A50 ETF had a rather decent week, closing 1.1% higher week-on-week.  Among all warrants over the A50 ETF listed on Bursa Malaysia, A50CHIN-C26 was the most active with RM24.3mil. traded.  A50CHIN-C24 came in close behind at RM22.1mil. traded.  Between both warrants, A50CHIN-C24 is more sensitive to price changes in the underlying with a lower exercise ratio of 1.5 to 1, versus A50CHIN-C26, which has a higher exercise ratio of 3 to 1. A50CHIN-C24 also has a lower implied volatility, which means it typically has a lower warrant price (all other factors held constant), thus requiring lower upfront capital.

Meanwhile, warrants over the Hang Seng Index continued to dominate the market, accounting for more than 67.8% of the week’s turnover.  Week-on-week, the volatile index gained 2.2% to close at 26,506.75 points despite dropping 0.9% on Thursday.  Call warrant HSI-C3X tracked the underlying closely, and enjoyed a bullish run by closing 19.8% higher at RM0.635.  Put warrant HSI-H4W, on the other hand, moved in an inverse direction to the underlying, dropping 23.3% to RM0.330.

Top 5 warrants by value traded:

Warrant name Value
Issuer Exercise level Expiry date
HSI-C3X 74.5 Macquarie 26,800 28 Mar 19
HSI-H4W 64.8 Macquarie 24,200 28 Mar 19
HSI-C3W 45.9 Macquarie 28,200 28 Mar 19
HSI-H4O 29.9 Macquarie 25,400 30 Jan 19
A50CHIN-C26 24.3 RHB 11.80 25 Jun 19

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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.