Chinese markets in the spotlight

LAST week, the warrants market in Malaysia recorded a total turnover of RM364.7 million, 14.5% higher than in the previous week. All eyes were on the Chinese markets as they reopened on Monday following the Lunar New Year holiday that was extended in view of the novel coronavirus outbreak.

The iShares China A50 Index ETF (China A50 ETF, 2823.HK), designed to track the performance of the 50 largest A-Share companies listed on the Shanghai and Shenzhen stock exchanges (as measured by the FTSE China A50 Index), fell 2.2% to HK$13.38 last Monday, causing investors to take profit on 1.1 million units of the put warrant A50CHINH37 as it gained 21%. Over the week, warrants over the China A50 ETF saw increased popularity, with more than RM5 million traded each day, taking up 8.5% of last week’s warrant turnover.

Meanwhile, the Hang Seng Index (HSI) fell for the fourth straight day on Monday, but did a turnaround on Tuesday, with the futures rising 2.2% to 26,777 points. On Wednesday, the futures dipped a slight 0.1% but again recovered on Thursday, with the futures surging 2.4%, causing investors to net sell 15.2 million units of HSI-C7Q and 12.7 million units of HSI-C7K while buying the put warrants over the HSI, namely 13 million units of HSI-H8W and 8.3 million units of HSI-H8K.

Investors should note that some popular warrants such as HSI-C7K and HSI-H8K will expire near the end of the month on Feb 27, 2020, meaning their last trading date is on Feb 25. Warrants near expiry will experience faster time decay; investors should consider longer dated warrants in order to reduce their holding cost for warrants.

On Friday, the HSI futures eased off their gains, losing 0.4% to end the week at 27,274 points, 4.1% higher, a relief after the sell-off in the previous week. The HSI warrants dominated the warrants market, comprising 61.4% of turnover. Call warrant HSIC7Q, which expires at end-March 2020, took the top spot last week with RM54.8 million traded, with put warrant HSI-H8K coming in second with a turnover of RM44.9 million.

In the local scene, DSONIC-C17, the call warrant over Datasonic

Corporation, saw the highest turnover with RM5 million traded as the shares rose to RM1.52, 4.1% higher week on week. Other than that, call warrants FRONTKN-CG, AIRASIA-C98 and MYEG-C85 were also popular with investors.

To view the full list of structured warrants available on Bursa Malaysia,

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.