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Why is PROTON-CJ trading at High Premium even after GO announcement?

When DRB-Hicom made a general offer for Proton shares at RM5.50, those punters who bought Proton call warrants which were trading at a high premium suffered due to the collapse in time value.  Buyers of warrants should avoid those warrants whose underlying shares have a high chance of being taken over especially if the warrants were trading at relatively high premium prior to the offer being made.  In the announcement of Proton offer by DRB-Hicom, the offer price was only 2.8% higher than the weighted average price of the last 5 trading days prior to the announcement.  The offer price was also only 12.7% higher than the one-month weighted average price of Proton but some of the Proton structured call warrants were trading at premium in excess of 20% prior to the announcement of the offer.

Which Affin call warrant to punt?

The share price of Affin Holdings Berhad has risen over the last few days on takeover rumuors and possible earnings surprise.  There are three call warrants on Affin which are listed on Bursa Malaysia.  AFFIN-CA and AFFIN-CD are issued by CIMB while AFFIN-CC is issued by Kenanga.

Beware of DRBHCOM-CC Further Issuance

CIMB has announced today that it plans to further issue another 50 million DRBHCOM-CC on top of its existing issue of 50 million.  When issuers carry out additional issues, it usually means that the amount outstanding not held by the public has reached a low enough level for the issuer to want to increase supply.  The reason why issuer wants to issue more warrants is to ensure effective market making.  It is argued that when too many outstanding issues are in the hand of the public, the warrant may not track the underlying movement effectively, hence the need for additional issue.  Nevertheless, this argument is only valid if the issuer is market making in a fair way. 

Why is UNISEM-CA volume so High!

Unisem share had a strong day last Friday climbing up 8 sen or almost 4% to close at RM2.13.  This has led to a spectacular rally in UNISEM-CA, which surged 85% or 3 sen to 6.5 sen on volume of more than 33 million warrants.  The company warrant UNISEM-WA was also up on respectable volume of 6.2 million while UNISEM-CB attracted only a relatively modest volume of 3 million.

Why is the volume of UNISEM-CA so high considering its total warrants issued was only 100 million?

Getting a Glimpse of Issuers’ Market-Making Activities

When buying structured warrants, one must make sure that he is not buying the warrants at very high valuation so that the instruments track the underlying movement effectively.  One way to better equipped in trading structured warrants is to look at issuers’ market making activities.  Unlike warrant traders in Hong Kong, we are not as fortunate to be able to lay our hands on issuers’ market making activities on a daily basis.  Bursa Malaysia only requires issuers to publish their market making activities at the end of the month.


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