Strong profit-taking in market, Hang Seng Index futures rebound

HANG Seng Index (HSI) futures took a bullish turn last week, with a strong 2.2% rebound to close at 28,213. It was almost a perfect one-direction week, with the futures recording a gain for four consecutive days from Monday to Thursday, its longest winning streak since June 4, 2018.

The warrants market saw huge profit-taking as investors sold back the call warrants, which moved in tandem with the underlying futures. Call warrant HSI-C30 was one of the most active warrants, with a 31.4% gain to close at RM0.460 on Thursday. The warrant shed 9.8% on Friday as the HSI futures tumbled 1.1%.

Put warrant HSI-H4I continued to see huge trading interest as it is one of the few put warrants that currently have an appropriate exercise level based on the current futures level. The warrant moved in an inverse direction to the futures, falling for the first four days of the week, before regaining 7.7% to close at RM0.560 on Friday.

When trading warrants over the HSI, it is important to check the inventory levels of these warrants. This is because a sold-out warrant could potentially be trading at a much higher price than the issuer’s market-making price. Investors may refer to the live matrix of each warrant to check if the prices match what is shown in the market.

Warrants over Malaysian single stocks continued to surround popular names such as DRB-Hicom, Supermax Corp, Malaysian Resources Corp (MRCB) and CIMB Group. For MRCB, the stock was actively traded after the government confirmed that MRCB-George Kent Sdn Bhd would remain the project delivery partner for Light Rail Transit 3.

Among the 10 warrants over MRCB, MRCB-C33 was the most active with more than 40.2 million units traded. MRCB-C33 has an exercise price of RM0.800, which is close to where the underlying shares are currently trading. MRCB-C33 has a sensitivity of about three ticks, which means it will move one tick for every threetick movement in the underlying.

Call warrant DRBHCOM-C59 was also actively traded for the week. The warrant fell, in line with the underlying share price, on Monday but remained unchanged over the next two days even though the underlying rebounded 1.8% on Tuesday and fell 0.4% on Wednesday. DRBHCOM-C59 has an in-the-money exercise price of RM2.00 and will

TOP 5 WARRANTS BY TRADED VALUE

Warrant Name HSI-H4I HSI-C3O HSI-H4G HSI-C3N HSI-H4O Volume (mil) 79.8 55.0 45.0 39.7 32.8

expire on Feb 27, 2019. Issuer

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Provided for Malaysian Exercise Price (RM) 27,800 31,200 28,600 32,200 25,400

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.