Warrants Commentary (2 to 6 December)
Last week, the Malaysia warrants market saw a general slowdown in trading activity as we entered into the first week of December, though warrants over the Hang Seng Index (HSI) still maintained an average daily turnover of RM37.2mil. Total turnover came up to RM247.5mil, a decline from RM319.3mil in the previous week.
On Monday, the HSI started the week off slow, rising 0.4%. On Tuesday, the HSI declined 0.2%, causing bearish investors to collect 2.9mil put warrant HSI-H8F and close to 1mil put warrant HSI-H8E. On Wednesday, the HSI fell a further 1.2% to 26,062.6 points as investors react to fresh trade war worries following US President Donald Trump’s fresh tariffs against Brazil and Argentina, and his comments that a trade deal with China might have to wait till after the 2020 US presidential elections (CNBC, 3 Dec). Investors took profit on the put warrants, namely 4.8mil HSI-H8F and 2.3mil HSI-H8E, and collected the call warrants, namely 7mil HSI-C7K and 3.1mil HSI-C7F.
Bullish investors were rewarded as the HSI rebounded over the following two days, rising a total 1.7% to finish the week at 26,498.4 points, 0.6% higher week-on-week (w-o-w). With the increase, call warrants HSI-C7K and HSI-C7F appreciated over 20% over these two days, causing investors to take profit on 17.2mil HSI-C7K and 15.1mil HSI-C7F.
Last week, the put warrant HSI-H8F, which was the top traded warrant for three weeks in a row, finally fell to second place with RM50.4mil traded. This put warrant expires at the end of the month on 30 December 2019. Investors still trading this warrant should take note that warrants close to expiry will experience faster time decay than warrants with longer time to expiry. This means that the warrant price will decrease over time even if the underlying price does not change. Call warrant HSI-C7K, expiring on 27 February 2020, took over the top spot as investors turned bullish following the declines earlier in the week. This warrant saw RM85.3mil traded.
On the Malaysian front, put warrant FBMKLCI-H8X over the local benchmark FBM KLCI still saw interest this week with RM5.8mil traded as the FBM KLCI rose 0.4% w-o-w to 1,568.4 points. Over last week, we saw interest in warrants over various Malaysian companies, including Pentamaster Corporation, Guan Chong, Dayang Enterprise and FGV Holdings. Popular warrants include PENTA-CF, GCB-CL, DAYANG-C1 and FGV-C85.
Top warrants by value traded:
|Issuer||Exercise level||Expiry date|
|HSI-C7K||85.3||Macquarie||28,000||27 Feb 2020|
|HSI-H8F||50.4||Macquarie||26,400||30 Dec 2019|
|HSI-C7Q||11.6||Macquarie||28,400||30 Mar 2020|
|HSI-H8S||7.2||Macquarie||24,400||30 Mar 2020|
|HSI-C7F||7.0||Macquarie||27,400||30 Dec 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.