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G20 meeting boosts market sentiment for HSI

Warrants Commentary (1 July to 5 July)

Last week, despite the protests occurring in Hong Kong on its public holiday in conjunction with the HKSAR Establishment Day on Monday, the Hang Seng Index (HSI) had a strong rally, trading above the 28,000 level when it reopened from the long weekend.  Market sentiments were boosted after the US-China meeting at the Group of 20 (G20) Summit last Saturday, which ended with a truce as both parties agreed to resume talks that have stalled since May. The meeting saw Trump putting on hold the additional tariffs on USD300bil. worth of Chinese products which he had earlier threatened.

On Tuesday (2 July), the HSI futures broke the 29,000 level to trade at 29,054 points in the morning session, before ending the day 1.5% higher at 28,932 points. However, the futures closed in the red over the next three days, ending the week at 28,780 points. 

Despite the shorter trading week in Hong Kong, the HSI warrants contributed the highest turnover among all underlyings, recording a total turnover of RM218.4mil., approximately 58.4% of the overall warrants turnover on Bursa Malaysia. The HSI put warrant, HSI-H6R, emerged as the most active warrant with its trading value recording the highest at RM59.2mil.  Throughout the week, investors traded 151.9mil. units and took home 1.2mil. units of this warrant, which fell 20.9% week-on-week (w-o-w). 

The HSI call warrant, HSI-C5J, was also popular among investors as they traded a total turnover of RM39.6mil and net bought 4.6mil units over the week. HSI-C5J is among the eight HSI warrants expiring at the end of this month. Investors should exercise caution when trading shorter-dated warrants as they may experience the highest time decay; the time value of warrants decline at the fastest rate when they  approach expiry. Investors should also keep a look out by regularly checking the Bursa Malaysia website for any changes to the July 2019 HSI warrants’ expiry date, as it currently coincides with the newly-announced public holiday on 30 July 2019. 

On the local front, the call warrant MYEG-C68 continued to be popular among investors as last week’s trading volume rose 25.9% to 47.6mil. units from 37.8mil. units. This warrant has an effective gearing of 3.5 times, which means it moves approximately 3.5% for every 1% change in the underlying (all other factors held constant).  

Top warrants by traded value:

Warrant nameValue
(RM ‘mil)
IssuerExercise levelExpiry date
HSI-H6R59.2Macquarie27,60027 Sep 2019
HSI-C5J39.6Macquarie28,80030 Jul 2019
HSI-C5P30.7Macquarie29,60027 Sep 2019
HSI-H6Q24.2Macquarie26,20027 Sep 2019
HSI-C7D15.5Macquarie  31,00030 Dec 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.