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Put warrant HSI-H8F gains 42.0% in 2 days

Warrants Commentary (18 to 22 November)

Last week, the Malaysia warrants market recorded a turnover of RM333.0mil, 2.3% lower than the previous week. We continue to see massive interest in the Hang Seng Index (HSI) warrants which made up 72.3% of the total warrants market with RM240.7mil. traded.

The HSI futures were on a rollercoaster trend last week with a mixture of good and bad news. Last Monday, the China’s central bank, the People’s Bank of China (PBOC) unexpectedly lowered the 7-day reverse repurchase rate to 2.5% from 2.55%, the first easing in the liquidity tool in more than four years (Nasdaq, 18 Nov). The HSI futures surged  a combined 799 points on Monday and Tuesday to close above the 27,000 level for the first time since early November. However, the HSI futures erased most of the earlier gains on Wednesday and Thursday after the US Senate passed a legislation to support protestors in Hong Kong which will potentially jeopardize the ongoing trade talks between US and China (Bloomberg, 20 Nov). On Friday, the HSI futures regained some ground to finish the week at 26,623.0 points; up 1.31% week-on-week (w-o-w).

Again, the put warrant HSI-H8F emerged as the top traded warrant for the second consecutive week with RM85.5mil traded. Investors who were bearish on the Hong Kong market did some huge bargain hunting on Monday and Tuesday, net buying a total of 21.4mil units of HSI-H8F as the bid price of the put warrant fell 39.8% on the first 2 days of the week. Investors subsequently took profit on their positions, pocketing an approximate 42.0% gain as the HSI futures fell on Wednesday and Thursday. Put warrants allow investors to profit from a downtrend in the market as the price of put warrants move in the opposite direction as the underlying share or index.

On the local front, warrants over Guan Chong Berhad (GCB) were actively traded after the company reported a 38.0% year-on-year jump in its third quarter profit (The Edge Markets, 18 Nov). Call warrant GCB-CG was the most popular GCB warrant last week with RM5.8mil turnover, followed by GCB-CH with RM3.9mil traded. Both warrants tracked GCB’s share price movement and finished 73.5% and 86.8% higher w-o-w, respectively.

Top warrants by value traded:

Warrant name Value
Issuer Exercise level Expiry date
HSI-H8F 85.5 Macquarie 26,400 30 Dec 2019
HSI-C7K 69.4 Macquarie 28,000 27 Feb 2020
HSI-C7F 24.7 Macquarie 27,400 30 Dec 2019
HSI-C7Q 18.9 Macquarie 28,400 30 Mar 2020
HSI-C7J 11.8 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.