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HSI warrants actively traded despite shorter week

Warrants Commentary (20 May to 24 May)

The Hong Kong’s Hang Seng Index (HSI) extended its third week of decline as the trade dispute between US and China escalated to another level. Recently, the Trump administration restricted US technology sales to Huawei and several other foreign-owned companies, based on Trump’s claim that the Chinese telco giant poses a national security risk (Market Watch, 20 May). Following this, Huawei was added into the US’ “entity list”, which bans the company from acquiring technology from US firms without prior government approval.

Earlier last week, the HSI remained bearish with the index falling 0.6% on Monday. It was further hammered on Tuesday, down 0.5%, following the ban on sharing technology with Huawei. Despite rebounding 0.2% on Wednesday, the HSI had sluggish momentum the following day, hitting an intra-day low of 27,169.7 points while closing 1.6% lower. However, the index finished in the green on Friday, closing 0.3% higher to end the week at 27,353.9 points, down 1.6% week-on-week (w-o-w).

Despite a shorter trading week, warrants over the HSI continued to be favoured by investors’, with total turnover recording at RM236.9mil, 86.3% of overall warrants turnover on Bursa. Last week, HSI-C5J was the most active warrant with 100.5mil. units traded. Bargain hunters were seen taking advantage of the sluggish index on Thursday, taking home 4.8mil. units on the same day; they sold back 2.5mil. units the following day when the index rebounded. The call warrant, which moved in tandem with the HSI, tumbled 25.8% w-o-w as its bid price closed at RM0.245 on Friday.

On the local front, call warrant over My E.G. Services (MYEG) MYEG-C68 continued to gain popularity as a total 39.3mil. units changed hands. This warrant has an effective gearing of 3.2 times, which means (other factors held constant) the warrant tends to move approximately 3.2% for every 1% move in its underlying.  The warrant’s bid price fell 15.0% w-o-w while MYEG shares fell 2.8% w-o-w.

When trading warrants, investors are advised to check each warrant’s expiry date and last trading date. For example, there are eight (8) warrants over the HSI expiring on Thursday, 30 May 2019, which means that their last trading date is on Tuesday, 28 May 2019, i.e. two days before their expiry date.

Top warrants by volume traded:

Warrant nameVolume
(mil. units)
IssuerExercise level / priceExpiry date
HSI-C5J100.5Macquarie28,80030 Jul 2019
HSI-C5H84.6Macquarie28,00027 Jun 2019
HSI-H6Q83.2Macquarie26,20027 Sep 2019
HSI-C5P76.9Macquarie29,60027 Sep 2019
HSI-C5S50.5Macquarie31,80030 Oct 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.