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Volatility continues as trade war intensifies

Warrants Commentary (17 June to 21 June)

Last week, President Trump announced on a Twitter post that Chinese leader Xi Jinping has agreed to meet with him at the G20 summit in Japan.  The announcement acted as a catalyst for the Hang Seng Index (HSI) futures, pushing it up 702 points or 2.6% on Wednesday to close at 28,146. On Thursday, riding on the same momentum, the HSI futures gained an additional 1.3% to 28,515, before closing 0.3% lower to end the week at 28,422 points. Week-on-week, the HSI futures rallied 5.1%, the highest gains since November last year.

Put warrant HSI-H6Q was by far the most active warrant for the week with a whopping RM116.0 mil. traded.  Put warrants move in an opposite direction to the underlying index, falling in value as the HSI futures increase.  The warrant suffered a steep drop on Wednesday, ending the day 22.9% lower to RM0.320, but rebounded 3.8% on Friday as the HSI futures retreated.  Investors were seen bargain hunting in this warrant as the warrant fell from RM0.600 just two weeks ago to close at RM0.275 on Friday, up 3.7%.

On the flip side, investors who traded HSI-C5J were in for a treat, enjoying a 46.0% increase in a single day.  The warrant surged from RM0.185 to close at RM0.270, moving in tandem with the underlying. During the week, put warrant HSI-H6N was also a popular trade among investors as the warrant fell below the RM0.100 range. Investors bought a total of 42M units of HSI-H6N, causing this warrant to be fully sold out. Investors should exercise caution trading a fully sold-out warrant as the issuer can no longer provide an offer price for this warrant. When a warrant is sold out, the bid price may be inflated as other investors may be bidding higher than the issuer’s bid price.   

Among single stock warrants, warrants over Telekom Malaysia remained active as the share price surpassed the RM4.00 level, a new one year high.  TM-C40 was the most active with 25.7mil. units traded, followed by TM-C41 with 25.5mil. units changing hands. Between the two warrants, TM-C41 has a higher effective gearing of 3.7x.  Meaning, with all other factors held constant, TM-C41 will move approximately 3.7% for every 1% move in the underlying share price.

Top warrants by value traded:

Warrant nameValue
IssuerExercise levelExpiry date
HSI-H6Q116.0Macquarie26,20027 Sep 2019
HSI-C5J84.9Macquarie28,80030 Jul 2019
HSI-C5P72.8Macquarie29,60027 Sep 2019
HSI-C5Q43.4Macquarie28,20027 Sep 2019
HSI-H6P18.0Macquarie24,80027 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.