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Warrants trading activity surged on heightened market volatility

Warrants Commentary (24 to 28 February)

Trading activity in structured warrants rose in a highly volatile market last week on the back of increased COVID-19 infections in around 50 countries across the globe, plus the political turmoil and uncertainties surrounding various countries, including Malaysia.  Overall warrants turnover jumped 39.8% week-on-week (w-o-w) to RM418.3mil while the average daily turnover recorded at RM83.7mil, 22.3% higher than the daily average over the month of February 2020. Meanwhile, warrants over the Hang Seng Index (HSI) made up 58.6% of turnover, while the warrants over the S&P 500® Index (SP500), which saw a new listing of a pair of call and put warrant in February following the expiry of the last two warrants in December 2019, contributed 11.9%. 

As stocks market around the world plunged into correction territory, the SP500 shed 0.8% to finish below the 3,000 mark at 2,954.2 points last Friday, losing 11.5% w-o-w. Meanwhile, the HSI tumbled 4.3% w-o-w as it closed on Friday below the 27,000 level at 26,129.9 points, down 2.4%. 

The most active warrant last week was call warrant HSI-C7V which saw a total 319.8mil units traded.  Bargain hunters took a chance in the downtrend of the underlying by accumulating more than 37.3mil units over the week. HSI-C7V plunged 51.4% w-o-w as the HSI futures plummeted 3.7% w-o-w. Put warrant HSI-H8W was the second most active warrant with a total volume traded of 259.8mil units. Investors took profit in this warrant, selling back 14.2mil units as this warrant gained a whopping 86.4% w-o-w. 

The new call warrant over the SP500, SP500-CJ (-78.8% w-o-w), was also in the spotlight, attracting investors to buy the entire issuance size of 14mil units in just four days since its listing on Bursa Malaysia, causing it to be sold out. Investors should exercise caution when trading a sold out warrant as prices may be inflated by other investors queuing in the market.  

On the local front, the share price of card manufacturer Datasonic hit its lower limit on Wednesday (26 Feb), urging Bursa Malaysia to launch a probe on the unusual market activity although the company denied knowing of any development that may cause the sudden decline in its share price (The Star, 27 Feb). DSONIC-C11, along with SUPERMX-C78, was among the top traded warrants over Malaysian counters. 

Top warrants by volume traded:

Warrant name Volume
Issuer Exercise level Expiry date
HSI-C7V 319.8 Macquarie 27,400 30 Mar 2020
HSI-H8W 259.8 Macquarie 25,400 30 Mar 2020
HSI-H8T 103.6 Macquarie 27,600 30 Mar 2020
HSI-C7Z 89.4 Macquarie 28,000 28 Apr 2020
HSI-C7Q 80.3 Macquarie 28,400 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.