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HSI-H6R emerged as investors’ favourite

Warrants Commentary (29 July to 2 August)

Malaysia’s warrants market saw a lower total turnover of RM414.4mil. due to the 4-day trading week. However, trading activity in the Hang Seng Index (HSI) warrants continued to dominate the warrants space with RM306.0mil. traded, comprising 73.9% of the total warrants turnover.

Last week, the HSI futures declined 5.4% week-on-week (w-o-w), recording the worst weekly performance since early May 2019. Last Monday, the HSI futures plunged 0.9% following another violent outbreak during the protests in Hong Kong on Sunday (2 Aug). The HSI futures then recovered some of its losses on Tuesday to finish at 28,124.0 points. Meanwhile, Hong Kong’s gross domestic product for the second quarter of the year shrank by 0.3%, compared to the 1.3% expansion in the first quarter (31 Jul, Trading Economics), and the Federal Reserve has cut interest rates by 25 basis point, driving the HSI futures to finish in the negative territory from Wednesday to Friday, ending the week below the 27,000 mark at 26,817.0 points.

Among the HSI warrants, put warrant HSI-H6R stood out as the most active warrant last week with RM88.0mil. traded. The bid price of this warrant rose 83.3% as the HSI futures declined last week. Put warrants generally move in the opposite direction to the underlying share or index. Investors also heavily traded put warrants HSI-H6T and HSI-H6Q, which have lower exercise levels at 27,000 and 26,200, respectively. With all other factors kept constant, a put warrant with a lower exercise level tend to have a lower gearing level, which can be associated with a lower level of risk. Meanwhile, bargain hunters also seized the opportunity to collect the call warrant HSI-C5T as its bid price fell 61.8% w-o-w. Investors took home a total of 40.4mil. units of HSI-C5T last week, resulting in this call warrant being close to sold out.

On the local front, warrants over Genting Malaysia were popular among investors last week. Call warrant GENM-C58 emerged as the top traded stock warrant last week with a RM6.0mil. turnover. Investors turned from net sellers on Monday and Wednesday to net buyers on Thursday and Friday as the bid price of this call warrant fell 24.2% w-o-w.

Top HSI warrants by value traded:

Warrant nameValue
(RM’mil)
IssuerExercise levelExpiry date
HSI-H6R88.0Macquarie27,60027 Sep 2019
HSI-H6T63.4Macquarie27,00030 Oct 2019
HSI-H6Q35.6Macquarie26,20027 Sep 2019
HSI-C5T22.5Macquarie30,00030 Oct 2019
HSI-C5Q20.8Macquarie28,20027 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.