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Growing demand in index warrants as markets remain volatile

Global stock markets remained turbulent with mounting fears over the rapidly spreading coronavirus that has aggressively caused major blows to economies around the world including Malaysia, as the government enforces a movement restriction order from Wednesday (18 Mar). On Sunday (15 Mar), the US Federal Reserve (the Fed) announced another emergency rate cut,  the largest in the Fed’s 100-year history, reducing interest rates by 1.00% to between 0% and 0.25%. Similarly, over 50 countries rushed to reduce interest rates and infuse liquidity, including Australia (-0.25% to 0.25%), New Zealand (-0.75% to 0.25%), Indonesia (-0.25% to 4.5%) and South Korea (-0.50% to 0.75%), among others. 

The Fed’s move failed to lift investors’ worry as they continued their selloff last Monday (16 Mar), resulting in the S&P 500® Index (SP500) triggering its circuit breaker, halting its trading for 15 minutes on Monday morning. Upon reopening, the SP500 plunged further to close at 2,386.13 points, down 12.0%, the biggest drop since the crash of 1987. Week-on-week (w-o-w), the SP500 slid 15.0%.

Last week, overall warrants turnover fell 7.9% to RM330.3mil. Once again, turnover for the Hang Seng Index (HSI) warrants dominated the market, constituting 73.9% of turnover, followed by the FBM KLCI warrants which made up 10.2% of the total warrants turnover. Warrants over single stocks contributed approximately 14.4%, dominated mainly by the glove counters. 

The HSI put warrant, HSI-H8M, was the top warrant by turnover, recording the highest traded value of RM92.2mil. At the end of the week, investors accumulated 7.8mil units of this put warrant which fell 17.1%. The HSI call warrant HSI-C9J (-32.3%) came in second with investors trading RM39.5mil worth. Investors bought a total of 22.3mil units of this warrant over four days before selling back 14.9mil units when the HSI futures rebounded 5.6% to close above the 23,000 level at 23,057.0 points last Friday. The call warrant tumbled 32.3% w-o-w as its underlying HSI futures fell 3.3% w-o-w. 

Meanwhile, on the local front, the FBM KLCI put warrant FBMKLCI-H8R also garnered good demand among bearish investors as they traded RM14.7mil worth. The FBM KLCI dropped 41 points or 3.1% w-o-w. As for warrants over single stocks, SERBADK-C1 was the top traded warrant with a trading volume of 34.6mil units, followed by SUPERMX-C78 with a total of 33.6mil units traded. 

Top warrants by value traded:

Warrant name Value
Issuer Exercise level Expiry date
HSI-H8M 92.2 Macquarie 23,000.0 28 Apr 2020
HSI-C9J 39.5 Macquarie 27,400.0 29 Jun 2020
HSI-H8Z 23.1 Macquarie 24,000.0 28 Apr 2020
HSI-C9S 21.0 Macquarie 27,600.0 28 Aug 2020
HSI-C9T 15.7 Macquarie 26,200.0 28 Aug 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.