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Trading in HSI warrants lower despite HSI’s 1.7% recovery

Warrants Commentary (19 August to 23 August)

Last week, the Hang Seng Index (HSI) showed a recovery, trading above the 26,000 level for the whole week, which was supported by Beijing’s plan to reform its interest rate system and lower borrowing costs (Bloomberg, 19 August). On Tuesday (20 August), China made its first move to implement a long-awaited change to its interest rate policy by lowering its lending reference rate to 4.25%  through a new market-oriented pricing mechanism. This move would result in cheaper borrowing costs for companies, providing a modest easing of monetary conditions in China’s economy amid the trade war with the United States.

The HSI moved in a strong positive momentum last Monday and had its biggest daily gain recorded in two months as the index jumped 2.2% to close at 26,291.8 points. For the rest of the week, the HSI had a yo-yo movement with the index slipping 0.2% on Tuesday before rebounding 0.2% the day after. On Thursday, the HSI tumbled 0.8% again amid uncertainty over future Federal Reserve rate cuts but it managed to rebound again to close 0.5% higher at 26,179.3 points ahead of the weekend. Week-on-week (w-o-w), the HSI rose 1.7%. 

Trading in HSI warrants was a bit slower than the previous week despite a slightly more bullish and supported market. Overall, warrants over the HSI contributed 74.6% of the overall warrants turnover of RM420mil. The HSI put warrant, HSI-H6P was in the spotlight last week, emerging as the most actively traded warrant among investors, with its trading volume recording the highest at 227.1mil. units. Investors net sold 1.9mil. units of this warrant which fell 37.7% w-o-w. Meanwhile, the HSI call, HSI-C7F came in second with investors changing hands for 153.1mil. units. 

On the local front, last Friday, DRB-HICOM announced that its financial results returned to the black. Its 1Q19 revenue jumped 29.5% to RM3.44bil. which is mainly contributed by improved sales in the automotive sector. DRB-HICOM’s share price surged 1.7% to RM2.95 last Friday an 8.5% gain w-o-w. DRBHCOM-C81 was the most notable warrant as investors traded 22.0mil. units, while DRBHCOM-C75 had investors trading 20.1mil. units throughout the week. 

Top warrants by volume traded:

Warrant nameVolume
(mil.)
IssuerExercise levelExpiry date
HSI-H6P227.1Macquarie24,80027 Sep 2019
HSI-C7F153.1Macquarie27,40030 Dec 2019
HSI-H6Q109.5Macquarie26,20027 Sep 2019
HSI-C7E90.6Macquarie29,20030 Dec 2019
HSI-H8E70.0Macquarie24,60030 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.