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HSI warrants popular amid volatile markets

Warrants Commentary (28 to 31 Jan)

Last week, overall warrants turnover rose 22.4% to RM303.9mil despite another 4-day trading week due to the Federal Territory Day on Friday (1 Feb). Trading in warrants over the Hang Seng Index (HSI) represented 75% of total warrants turnover. Although the HSI had a lackluster performance at the start of the week, it started to recover from Wednesday with a 0.4% increase ahead of the Federal Reserve (Fed) policy meeting. The HSI then jumped 1.1% last Thursday.

In Wednesday’s meeting, chairman Jerome Powell said the Fed will be patient on future rate hikes before making any further moves, discarding its promises of “further gradual increases” in interest rates (Reuters, 30 Jan). The Fed also said it is willing to adjust the size of its balance-sheet runoff and perhaps end it altogether, amid worries that it contributed to the stock market selloff last December (Market Watch, 30 Jan).

The HSI put warrant HSI-H4X took the crown as the top traded warrant with 138.8mil units traded over last week. On Monday, investors collected 1.6mil units of this warrant and eventually net sold 9.2mil units over the next 3 days. HSI-H4X moved in an opposite direction to the underlying, losing 19% as the HSI futures advanced 1.5% last Thursday. Investors should note that all HSI warrants started tracking the HSI February futures from last Tuesday (29 Jan).

Meanwhile, the HSI call warrant HSI-C3W came in second, recording a total trading volume of 100.3mil units. HSI-C3W has an effective gearing of 14.6 times, meaning it moves approximately 14.6% for every 1% move in the underlying futures (all other factors held constant). HSI-C3W gained 19.4% week-on-week (w-o-w).

On the local front, the call warrant over FGV Holdings (FGV), FGV-C63 emerged as the most popular warrant over Malaysian counters, with 40.7mil units traded. FGV-C63’s bid price fell 11.5% while its mother share inched down 0.02% w-o-w to close at RM1.00 on Thursday.

Investors should note that Bursa Malaysia will be closed for 2.5 days, starting from the afternoon session on Monday (4 Feb) up to Wednesday (6 Feb), for the Chinese New Year holidays. The Hong Kong Exchange will be closed up to Thursday (7 Feb). Have a happy and prosperous Chinese New Year!

Top warrants by volume traded:

Warrant name Volume
Issuer Exercise level Expiry date
HSI-H4X 138.8 Macquarie 25,600 28 Mar 19
HSI-C3W 100.3 Macquarie 28,200 28 Mar 19
HSI-C5A 62.6 Macquarie 29,200 29 Apr 19
HSI-C5B 54.8 Macquarie 27,800 29 Apr 19
HSI-H4Y 41.8 Macquarie 27,000 28 Mar 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.