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Volatile week for the markets

Warrants Commentary (3 to 7 February)

Last week, the warrants market in Malaysia recorded a total turnover of RM364.7mil, 14.5% higher than the previous week. All eyes were on the Chinese market as it reopened on Monday following the Chinese New Year holiday that was extended in view of the coronavirus outbreak. The iShares China A50 Index ETF (China A50 ETF, 2823.HK), 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), fell 2.2% to HKD13.38 last Monday, causing investors to take profit on 1.1mil units of the put warrant A50CHIN-H37 as it gained 21%. Over the week, warrants over the China A50 ETF saw increased popularity, with more than RM5mil traded each day, taking up 8.5% of last week’s warrant turnover.

Meanwhile, the Hang Seng Index (HSI) fell for the fourth straight day on Monday, but did a turnaround on Tuesday, with the futures rising 2.2% to 26,777 points. On Wednesday, the futures dipped a slight 0.1% but again recovered on Thursday, with the futures surging 2.4%, causing investors to net sell 15.2mil units of HSI-C7Q and 12.7mil units of HSI-C7K while buying the put warrants over the HSI, namely 13.0mil units of HSI-H8W and 8.3mil units of HSI-H8K. Investors should note that some popular warrants such as HSI-C7K and HSI-H8K will expire at the end of the month on 27 February 2020, meaning their last trading date is on 25 February 2020. Warrants near expiry will experience faster time decay; investors should consider longer dated warrants in order to reduce their holding cost for warrants.

On Friday, the HSI futures eased off its gains, losing 0.4% to end the week at 27,274 points, 4.1% higher week-on-week (w-o-w), a relief after the sell-off in the previous week. The HSI warrants dominated the warrants market, comprising 61.4% of turnover. Call warrant HSI-C7Q, which expires in end March 2020, took the top spot last week with RM54.8mil traded, with put warrant HSI-H8K coming in second with a turnover of RM44.9mil.

In the local scene, call warrant over Datasonic Corporation, DSONIC-C17, saw the highest turnover with RM5.0mil traded as the shares rose to RM1.52, 4.1% higher w-o-w. Other than that, call warrants FRONTKN-CG, AIRASIA-C98 and MYEG-C85 were also popular with investors.

Top warrants by value traded:

Warrant name Value
Issuer Exercise level Expiry date
HSI-C7Q 54.8 Macquarie 28,400 30 Mar 2020
HSI-H8K 44.9 Macquarie 27,000 27 Feb 2020
HSI-C7K 30.6 Macquarie 28,000 27 Feb 2020
HSI-H8W 25.8 Macquarie 25,400 30 Mar 2020
HSI-H8T 22.0 Macquarie 27,600 30 Mar 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.