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Higher volumes on greater volatility in HSI

Warrants Commentary (10 June to 14 June)

Following the 2.5-day trading week in the previous week due to the Hari Raya, the warrants market saw a healthy boost last week as traders returned from the holidays, amassing a total turnover of RM493.5mil or an average of RM98.7mil per day.

The Hang Seng Index (HSI) experienced great volatility last week as, in addition to the continuing US-China trade dispute, Hongkongers took the streets to protest the controversial extradition bill, an initiative by the Hong Kong government. The index made some big moves last week, including rising 2.3% on Monday, falling 1.7% on Wednesday and losing 0.7% on Friday. The HSI ultimately ended the week 0.6% higher week-on-week (w-o-w) at 27,118.4 points.

Put warrant HSI-H6P was the most popular warrant last week with 318.1mil units traded. Last Wednesday, as the HSI fell, this put warrant saw over 73mil units traded, rising 24.1% to RM0.335 as put warrants move in an opposite direction to the underlying. As the week continued on, the warrant continued to be widely traded, with over 100mil units traded on Thursday itself. Meanwhile, the call warrant HSI-C5P came in second last week with 279.5mil units traded as the warrant price rose 2.3% w-o-w, in line with the increase in the HSI, as call warrants move in tandem with the underlying. Both these top warrants will expire on 27 September 2019.

On the local front, TM-C41, a call warrant over telecommunications giant Telekom Malaysia (TM), was the top traded stock warrant as its underlying share price were up for four consecutive days from Monday to Thursday last week, rising a total of 8.2% as speculations continued on who would become TM’s permanent chief executive officer (CEO). On Thursday, TM finally announced the appointment of Dato’ Noor Kamarul Anuar Nuruddin as its new managing director and group CEO. TM shares fell a slight 0.3% on Friday to end the week at RM3.80, up 8.0% week-on-week (w-o-w).

Call warrant TM-C41 correspondingly rose from Monday to Thursday, and closed unchanged on Friday, ending the week 36.8% higher at RM0.130. Warrants move in larger percentages than its underlying due to the gearing effect, allowing investors higher profit potential, though that also means a higher level of risk.

Top warrants by volume traded:

Warrant nameVolume
IssuerExercise levelExpiry date
HSI-H6P318.1Macquarie24,80027 Sep 2019
HSI-C5P279.5Macquarie29,60027 Sep 2019
HSI-C5J186.2Macquarie28,80030 Jul 2019
HSI-H6N156.0Macquarie25,40030 Jul 2019
HSI-H6Q128.3Macquarie26,20027 Sep 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.