Warrants Commentary (5 August to 9 August)
The Malaysian warrants market was heated up last week with a total RM594.8mil. traded, the highest weekly turnover since May 2019. The increased trading activity can be attributed to rising volatility in the global equity markets which includes the Hang Seng Index (HSI). Warrants over the HSI continued to dominate the warrants space with RM463.9mil. in weekly turnover, making up a staggering 78.0% of the total warrants market.
The trade tensions between U.S. and China continued to occupy the headlines last week. Last Tuesday (6 Aug), China announced that it has suspended the purchase of U.S. agricultural products in retaliation to the new 10% levies by US President Donald Trump on 1 August 2019 (6 Aug, South China Morning Post). The HSI futures plunged 2.9% on Monday and opened lower on Tuesday. However, we saw a strong rebound in the HSI futures on Tuesday, causing it to close only 0.2% lower for the day. Due to the ongoing protests in Hong Kong, the HSI futures were lagging behind other global equity markets. Instead of closing higher, the HSI futures were trading in the range of 25,595.0 to 26,246.0 points from Wednesday to Friday and finished the week at 25,883.0 points, down 3.5% week-on-week (w-o-w).
Put warrants over the HSI were top traded last week, with HSI-H6Q emerging as the most active warrant with RM97.9mil. traded. As the HSI futures traded lower, HSI-H6Q moved in the opposite direction and gained a whopping 53.0% w-o-w. Besides that, investors also traded a total RM96.6mil. worth of HSI-H6T as the put warrant closed 36.4% higher w-o-w. With all other factors kept constant, put warrants with a lower exercise level tend to have a higher gearing level (meaning a higher level of risk), which is why HSI-H6Q tend to move in larger percentages than HSI-H6T.
Among the warrants over Malaysian shares, call warrant GENM-C52 topped the chart with RM8.0mil traded. The share price of Genting Malaysia (GENM) had been climbing steadily in 2019, recording a 29.3% increase year to date as at 2 August 2019. However, the trend reversed last week after GENM acquired a stake in loss-making Empire Resorts from GENM’s chairman Tan Sri Lim Kok Thay for USD128.6mil. in cash (6 Aug, The Edge Markets).
Top HSI warrants by value traded:
|Issuer||Exercise level||Expiry date|
|HSI-H6Q||97.9||Macquarie||26,200||27 Sep 2019|
|HSI-H6T||96.6||Macquarie||27,000||30 Oct 2019|
|HSI-H6S||45.2||Macquarie||25,200||30 Oct 2019|
|HSI-H6P||41.3||Macquarie||24,800||27 Sep 2019|
|HSI-H6R||35.0||Macquarie||27,600||27 Sep 2019|
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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.