Slower trading, though HSI warrants remain active

LAST week, the Malaysia warrants market saw a general slowdown in trading activity as we entered the first week of December, although warrants over the Hang Seng Index (HSI) still maintained an average daily turnover of RM37.2 million. Total turnover came up to RM247.5 million, a decline from RM319.3 million in the previous week.

The HSI started the week slow, rising 0.4%. On Tuesday, the HSI declined 0.2%, causing bearish investors to collect 2.9 million put warrant HSI-H8F and close to 1 million put warrant HSI-H8E. On Wednesday, the HSI fell a further 1.2% to 26,062.6 points as investors reacted 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. Investors took profit on the put warrants, namely 4.8 million HSI-H8F and 2.3 million HSI-H8E, and collected the call warrants, namely 7 million HSIC7K and 3.1 million 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. With the increase, call warrants HSIC7K and HSI-C7F appreciated over 20% over these two days, causing investors to take profit on 17.2 million HSI-C7K and 15.1 million HSI-C7F.

Last week, put warrant HSI-H8F, which was the top traded warrant for three weeks in a row, finally fell to second place with RM50.4 million traded. This put warrant expires on Dec 30. 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 Feb 27, 2020 took over the top spot as investors turned bullish following the declines earlier in the week. This warrant saw RM85.3 million traded.

On the Malaysian front, put warrant FBMKLCI-H8X over the local benchmark FBM KLCI still saw interest this week with RM5.8 million traded as the FBM KLCI gained 0.4% week on week to 1,568.4 points.

Over last week, we saw interest in warrants over various Malaysian companies, including Pentamaster Corp, Guan Chong, Dayang Enterprise and FGV Holdings. Popular warrants include PENTACF, GCB-CL, DAYANG-C1 and FGVC85.

To view the full list of structured warrants 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.