The uphill battle for FGV warrants

MANY thought that the worst was over for Felda Global Ventures (FGV) after the stock lost 18.8% in the week before last. On Monday, investors were proven wrong after FGV tumbled a further 7.7% to RM1.44. The share price closed unchanged last Tuesday before staging a rebound to end the week 3.2% higher at RM1.61. Warrants over FGV continued to be the most active single share underlying, representing 9.0% of the total warrants turnover for the week ended Dec 2.

Among the warrants over FGV, FGV-C15 was the week’s top gainer, ending the week 50% higher at RM0.045. FGV-C15 commands the highest effective gearing of 5.7x. An effective gearing of 5.7x (other factors held constant), FGV-C15 will move approximately 5.7% for every 1% move in its underlying share price. The high effective gearing can be attributed to the warrant’s high exercise price of RM1.90 and shorted-dated expiry at Feb 28, 2017. Generally, the higher the warrant’s effective, the higher profit potential but higher the risk.

The most popular underlying (in terms of turnover) remains to be warrants over the Hang Seng Index (HSI). The HSI Futures remained calm throughout most part of the week, gaining a mere 93 points between Monday and Thursday. Things changed on Friday, which saw the volatile index falling 1.4% to end the week marginally lower at 22,575, due to arising concerns ahead of the Shenzhen-Hong Kong Stock Connect, which is set to debut this Monday ( Dec 5, 2017). Investors are also turning more cautious as they weigh possible political risks from Italy’s constitutional referendum and an expected December rate hike by the US Federal Reserve.

Among the warrants over the HSI, put warrant HSI-H63 emerged as the most actively traded warrant with RM50.3 million transacted over the week. The warrant fell for 4 consecutive days before surging 16.7% on Friday to end the week at RM0.490. Put warrants move in an inverse direction as the underlying, gaining in value as the underlying falls. For more information on index warrants, visit https://www. malaysiawarrants.com.my/indexsw.

TABLE: TOP 5 TRADED WARRANTS

Warrant Volume Closing Bid Exercise Name (mil. units) (RM) Price (RM) HSI-H63 50.3 0.480 Macquarie 22,400 26 Jan 17 HSI-C48 42.9 0.265 Macquarie 23,000 29 Dec 16 HSI-C60 14.4 0.310 Macquarie 24,200 27 Feb 17 HSI-H57 10.6 0.215 Macquarie 21,800 29 Dec 16 FGV-C12 10.3 0.180 RHB 1.35 14 Mar 17

To view the full list of structured warrants available on Bursa Malaysia, kindly visit Issuer Expiry Date