Episodic week for HSI warrants

Warrants Commentary (2 to 6 September)

Last week saw a lower turnover in the Malaysian warrants market compared to the previous week, partly due to the shorter trading week. Total warrants turnover came up to RM388.7mil. for the week or RM97.2mil. on average per day, lower than the average of RM111.7mil. in the previous week. However, warrants turnover on Tuesday and Wednesday skyrocketed in view of the increased volatility in the Hang Seng Index (HSI); turnover for warrants over the HSI was RM326.1mil., comprising 83.9% of overall turnover.

Last Monday, the Malaysian market was closed in view of the replacement holiday for Awal Muharram. The HSI futures fell 0.6% over Monday and Tuesday to close at 25,468 points. However, on Wednesday, the futures surged 4.0% or 1,008 points to 26,476 points on the back of the withdrawal of the controversial extradition bill that had sparked months of protests (South China Morning Post, 4 Sep). On this day alone, bearish investors net bought 21.1mil. units of put warrant HSI-H6P as the warrant price fell 51.4%. Put warrants move in an opposite direction to their underlying, meaning they will decrease in value as the underlying increases. Investors should note that HSI-H6P, with an exercise level of 24,800, expires soon on 27 September 2019 and its last trading date is on 25 September 2019. Investors should take note that the decay in the time value of warrants will speed up closer to expiry, meaning the warrant will lose value quicker over time even if the underlying remains at the same level.

On Thursday, the Hong Kong futures market (on which the HSI futures are listed) experienced connectivity issues from about 9:45am and was suspended from 2:00pm onwards, meaning the issuers of HSI warrants would not be able to make markets for HSI warrants. Nonetheless, the HSI futures resumed trading on Friday, and finished the week at 26,642 points, 4.0% higher week-on-week (w-o-w).

The put warrant HSI-H6S was the top traded warrant for the week, clocking in 302.9mil. units in total. Bearish investors net bought 22.4mil. units of this warrant over last week as the warrant bid price fell 45.7% w-o-w to close at RM0.220 last Friday. As at Friday, this warrant has an effective gearing of 15.4 times, meaning it moves 15.4% for every 1% change in the underlying.

Top warrants by volume traded:

Warrant nameVolume
IssuerExercise levelExpiry date
HSI-H6S302.9Macquarie25,20030 Oct 2019
HSI-C7F183.9Macquarie27,40030 Dec 2019
HSI-H6P136.2Macquarie24,80027 Sep 2019
HSI-H8E130.3Macquarie24,60030 Dec 2019
HSI-C7E116.8Macquarie29,20030 Dec 2019

If you have any questions or need further assistance, please do not hesitate to contact us via our email us at [email protected]

To view the full list of structured warrants available on Bursa Malaysia, kindly visit malaysiawarrants.com.my

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.