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FBM KLCI warrants gain traction amid Budget 2020

Warrants Commentary (7 October to 11 October)

Last week kicked off with a headline from the US stating that they are banning 28 Chinese public securities bureaus and companies over their alleged role in facilitating human rights abuses in the Xinjiang region, China. In addition to this, the US put visa restrictions on Chinese officials, adding to tensions between the US and China ahead of their trade talks that were scheduled later in the week (CNBC, 8 Oct).  

Despite the news, the Hong Kong Hang Seng Index (HSI) gained 0.3% on Tuesday after returning from the long weekend, before falling 0.8% on Wednesday amid investors’ declined optimism over the outcome of the US-China trade talks as tensions between both countries rose. However, the HSI rebounded on Thursday, edging 0.1% higher, then jumped 2.1% on Friday, boosted by an upbeat report from President Trump saying that the first day of trade talks in Washington went “very well”.

HSI-H6S continued to be investors’ favorite, becoming the top traded warrant for the week as investors traded 335.5mil units. Bargain hunters took advantage of the rise in the HSI over the last two days of the week, buying a total 34.4mil units of the put warrant. HSI-H6S plunged 65.9% week-on-week (w-o-w) as the HSI futures added 2.4% w-o-w.

Further, a put warrant over the S&P500 Index also saw increased demand, with investors buying 10.2mil units out of 12.4mil units traded. SP500-HI fell 35.2% w-o-w while the S&P500 futures rose 0.7% w-o-w.

Meanwhile in Malaysia, the FBM KLCI futures gained 0.5% last Friday as the Malaysian Budget 2020 announcement was tabled by the Finance Minister, Lim Guan Eng. In the announcement, the government forecasts Malaysian economy to grow 4.8% (vs 4.7% in 2019), and the inflation rate to expand 2% in 2020 (vs 1.9% in 2019), lifted by the introduction of targeted fuel subsidy (The Edge Markets, 11 Oct), among other announcements. Trading in the FBM KLCI warrants gained traction last week with a total of 17.5mil units traded, while the call warrant FBMKLCI-C7N was the top traded warrant over the local bourse, recording a trading volume of 6.9mil units.

For warrants over Malaysian shares, call warrants that were popular last week include GENTINGC-72, ECOWLD-CV, EKOVEST-CY and TM-C53.  

Top warrants by volume traded:

Warrant name Volume
Issuer Exercise level Expiry date
HSI-H6S 335.4 Macquarie 25,200 30 Oct 2019
HSI-C7F 142.8 Macquarie 27,400 30 Dec 2019
HSI-H8B 129.4 Macquarie 25,600 28 Nov 2019
HSI-H8E 117.4 Macquarie 24,600 30 Dec 2019
HSI-C7K 101.2 Macquarie 30,000 27 Feb 2020

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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.