First Thai DW on HSI debuts amid political chaos

Yesterday Thailand’s first foreign derivative warrant (DW), benchmarked to the Hang Seng index (HSI), had its first trading day amid Hong Kong’s protracted political unrest, rattling investor confidence.

The main objective is to broaden choices for overseas investment assets for local investors.

“We are not worried about the Hong Kong protest because the product series has both call [the right to buy at a specific price and time] and put [the right to sell at a specific price and time] options,” said Noppadon Duangthipnest, associate director and head of derivative sales at Macquarie Securities Thailand.

“Investors can hedge against risks or seek returns from Hong Kong’s bourse during both the upward and downward trends of stock market movement.”

Dean Herbert, head of listed product distribution at Macquarie Group, said yesterday’s launch was the right timing as Thai investors can capitalise on trading opportunities from current stock market conditions, which have volatile because of geopolitical conflicts and the US-China trade dispute.

The company offers four types of calls and four types of puts for the HSI-DW series, with exercise prices of 23,800 to 29,400 points, to serve different market perspectives and levels of risks.

Mr Noppadon said the Stock Exchange of Hong Kong is a gateway to investment in China and there are many shares of global companies traded on the exchange such as HSBC, Tencent Holdings and AIA Group.

“We are also studying the opportunity of issuing DWs on other foreign stock indices such as the Nikkei, S&P and Chinese A-Shares to serve investor demand to engage in foreign asset diversification,” he said.

DWs issued by companies listed on Malaysia’s and Singapore’s bourses contribute to 90% and 70%, respectively, of total market trading volume in the two Southeast Asian bourses, said Mr Noppadon.

Stock Exchange of Thailand (SET) president Pakorn Peetathawatchai said there were 2,197 new DW products issued during the first seven months this year, up 39% year-on-year.

DW products reported average trading value worth 5.41 billion baht, an increase of 38% against the same period of last year, and contributed to 11% of the SET’s total market trading value.

Rinjai Chaiyasut, president of Thailand Futures Exchange, said the SET recently revised the regulations to welcome investment products benchmarked to foreign indices to list in Thailand’s capital market, aiming to facilitate local investors and provide an opportunity to diversify investments beyond the country.

“DWs referenced to foreign indices have high potential as investors are looking for other choices besides domestic investment assets,” said Ms Rinjai.

“This HSI-DW is the first [foreign] derivative, but not the first foreign connected products that we have provided.”

Local investors can link their investments to overseas investment assets via local trading products such as exchange traded funds on China’s stock index and depository receipts on Vietnam’s capital market, she said.