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HSI and China A50 ETF warrants took up 75% of the market

Warrants Commentary (21 October to 25 October)

Last week, warrants over the Hang Seng Index (HSI) and the iShares China A50 Index ETF (China A50 ETF) collectively comprised close to 75% of the Malaysia warrants market turnover. Warrants over the HSI, making up 69.2% of the market, continued to be popular last week as the HSI seesawed throughout the week. On Monday and Tuesday, the index rose 0.25% to 26,786.2 points, but the gain did not sustain as the index then fell 0.9% to 26,566.7 points on Wednesday, after news broke that the Chinese government was planning to replace Carrie Lam, Hong Kong’s chief executive (Financial Times, 23 Oct).

However, later in the day, China’s foreign ministry strongly denied such reports, saying that it was a “political rumour with ulterior motives behind it” (South China Morning Post, 23 Oct). The index reversed its losses on Thursday, rising 0.9% to 26,798.0 points, but then fell 0.5% to 26,667.4 points on Friday as US Vice President Mike Pence, in a speech in Washington, commented on a wide array of matters involving China, though he ended his speech denying that the US wants to “decouple” from China.

Last week, the same two warrants, call warrant HSI-C7F and put warrant HSI-H8B, dominated the top traded warrants list. HSI-C7F (exercise level: 27,400) and HSI-H8B (exercise level: 25,600) expire on 30 December 2019 and 28 November 2019, respectively. Investors should note that warrants approaching expiry will experience steeper time decay than warrants with longer time to expiry, and may consider switching to longer-dated warrants.

Meanwhile, the China A50 ETF, which is designed to track the performance of the 50 largest A-Share companies listed on the Shanghai and Shenzhen stock exchanges (as measured by the FTSE China A50 Index), ended the week at HKD15.00, 0.4% higher w-o-w. Warrants over the China A50 ETF took up 5.6% of turnover, with call warrants A50CHIN-C50 and A50CHIN-C42 both making the top ten warrants traded by turnover. Trading in the China A50 ETF warrants was consistently popular last week, with daily turnover ranging between RM2.5mil to RM3mil from Monday to Thursday, and hitting close to RM6mil on Friday.

Meanwhile, warrants over Malaysian shares comprised 24.8% of last week’s turnover, with call warrants ARMADA-C53, DAYANG-C1 and DRBHCOM-C94 popular with investors.

Top warrants by value traded:

Warrant name Value
Issuer Exercise level / price Expiry date
HSI-C7F 89.0 Macquarie 27,400 30 Dec 2019
HSI-H8B 41.5 Macquarie 25,600 28 Nov 2019
HSI-H8F 39.2 Macquarie 26,400 30 Dec 2019
A50CHIN-C50 10.6 Macquarie 15.50 31 Mar 2020
HSI-H8E 10.3 Macquarie 24,600 30 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.