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HSI warrants in the spotlight as futures extend higher

Warrants Commentary (10 to 14 February)

The second week of February witnessed a total warrants turnover of RM285.3mil amid a less volatile week, which contributed to a 21.8% week-on-week (w-o-w) drop in turnover for the overall warrants market. Warrants over the Hang Seng Index (HSI) and the iShares China A50 Index ETF (China A50 ETF, 2823.HK) continued to take centre stage as prices extend their gains further over the week despite the coronavirus fallout in China having no end in sight. 

Trading in the HSI futures started the week somewhat uninspiring as prices end in the red on Monday, dragged by overnight losses on Wall Street the week before as concerns weigh following the Federal Reserve’s warning that the coronavirus outbreak posed a “new risk” to the economy (Bloomberg, 8 Feb). Positive sentiment then picked up starting Tuesday and carried on to Wednesday with prices touching a high of 27,820 before ending at 27,770 (+0.7%) on Wednesday. The advance saw profit-taking activities among the call warrants HSI-C7K and HSI-C7Q, with investors selling on strength for a total of 12.1mil and 12.3mil units respectively in the two days combined. HSI-C7K and HSI-C7Q each saw an 81% and 47.5% surge in price within the two trading days.

The rebound in the HSI futures, however, was halted on Thursday as confidence faded amid reports of a steep climb in the number of confirmed coronavirus cases and deaths after officials in China adopted a new methodology for diagnosis (Reuters, 13 Feb). The futures eventually ended the week at 27,753, gaining 1.7% w-o-w despite the weaker sentiment towards the end of the week. The HSI warrants still dominated the warrants market, comprising 52.6% of turnover, with call warrant HSI-C7Q stealing the limelight to be the most popular warrant for the week, recording a total turnover of RM49.2mil with 175.7mil units traded. This was followed by put warrant HSI-H8T with a total turnover of RM38.4mil.

The call warrant over the China A50 ETF, A50CHIN-C54, also saw increased popularity last week with a total turnover of RM12.8mil as investors were keen to gain exposure to the performance of the 50 largest A-Share companies listed on the Shanghai and Shenzhen stock exchanges, amidst the coronavirus outbreak in China. 

On the local front, call warrant over Ekovest Berhad, EKOVEST-C3, was among the popular favourites as it rose 50% w-o-w after the shares ended 10% higher for the week at RM0.760. Other than that, call warrants MYEG-C84, DSONIC-C17 and AIRASIA-C1A were also popular with investors. 

Top warrants by value traded:

Warrant name Value
(RM’mil.)
Issuer Exercise level / price Expiry date
HSI-C7Q 49.2 Macquarie 28,400 30 Mar 2020
HSI-H8T 38.4 Macquarie 27,600 30 Mar 2020
HSI-C7K 19.2 Macquarie 28,000 27 Feb 2020
HIS-H8K 13.9 Macquarie 27,000 27 Feb 2020
A50CHIN-C54 12.8 Macquarie 15.00 30 Jun 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.