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Malaysia Warrants News

SILVER-WA – Any Last Hope?

The warrant of soon to expire Silver Bird Group Berhad (SILVER-WA) has been hovering between 3 to 6 sen over the least 30 days.  As the warrant is expiring on 19th September 2010 and the exercise price is so close to the current share price, SILVER-WA speculative appeal is quite strong especially when the company announced that it will encourage the company’s warrants holders to exercise their warrants as a possible solution to its public shareholding spread requirement.


According to Silver Bird’s announcement on 30th June 2010, the percentage of the company’s public shareholding spread is 20.20%.  This is below Bursa Malaysia requirement of minimum 25% public shareholding spread.  To fulfill the shareholding requirement, Silver Bird has announced that it plan to explore the following actions:


Expiring WYNN-C1 Trading at Slight Discount

The share price performance of Macao casino operator Wynn Macao Limited, which made its debut in Hong Kong Stock Exchange last October, has been spectacular.  The price of Wynn is now 22% higher than the closing price of its first day of HKD10.78.  


WYNN-C1 is a structured call warrant issued by CIMB last year on the first day the underlying share got listed.  WYNN-C1 closed at 25 sen on 9th October 2009, the day it first listed.  The warrant was then traded at a whopping implied volatility of 118% and a premium of 35.6%.


Had an investor bought into WYNN-C1 when it was first traded, there was no chance he could have made any money unless he disposed the warrant on the same day.  Investors of the underlying share also went through a rough patch when Wynn traded as low as HKD8.67 in late October last year.  Nevertheless, the share managed to pick itself up following better than expected earnings and is up 39% in 2010 as Macao gambling business enjoyed strong growth this year in the absence of any new supply (of casinos).


China A-Shares Attractive after Steep Fall but A50CHTK-C1 out of time

China A-shares traded on mainland China exchanges become attractive valuation wise after steep decline in the past couple of months.  Up until 31st May 2010, the FTSE/Xinhua China A50 index, which tracks large free-float China shares listed in Shanghai and Shenzhen, is down about 25% for the year.  The iShares FTSE/Xinhua A50 China Tracker (SEHK: 2823) is an ETF listed in Hong Kong which track the performance of the index.  The ETF is currently trading at premium to NAV (Net Asset Value) of close to 10%.  This is the highest level of premium according to the NAV premium/discount table provided by the fund.


The constituents of FTSE/Xinhua China A50 index comprise mainly finance stocks, accounting for about 61% of the fund.  Its biggest component stocks include the likes of Ping An Insurance, China Merchants Bank, Industrial Bank, Bank of Communications etc.  The discount between H-shares traded in Hong Kong and its correspondent A-shares traded in mainland China has narrowed substantially.  Most banks and insurance companies H-shares are actually trading at a premium to their A-shares.  This possibly leads to the basket of stocks (A-shares) in A50 ETF trading at a discount to their H-shares in Hong Kong although not all shares in FTSE/Xinhua China A50 have H-shares listed in Hong Kong.  It is therefore not surprising to see A50 ETF trading at a premium as foreign investors see value in the fund.  Nevertheless, arbitrage activities should limit the premium of the ETF as a 10% premium is too attractive for the qualified institutions which can create more units of the fund.

Put Warrants Still Not Popular Despite Market Plunge

With the stock market sell down the past one week, the only instrument in the stock market that is likely to produce profit for its holders is put warrant.  There are a number of local underlying put warrants listed on Bursa Malaysia.  Nevertheless, the volume on these put warrants is not encouraging at all.


The “heaviest” traded of the local underlying put warrants, AXIATA-HA, hit a volume of 560,000 on May 24th.  This is the highest daily volume of the four local underlying put warrants from inception.


Why is the trading volume for put warrants so low?


The answer may be that there is no information or even worse, inaccurate information on put warrants listed on Bursa Malaysia.


The issuer for the 4 local underlying put warrants, OSK Investment Bank, did not have the put warrants listed on the structured warrants pricing table in its website.  It only contained information and indicators for call warrants.


What is nightmarish for investors is the incorrect premium calculation of put warrants on the trading website of most stock brokers in Malaysia.  Apparently, the premium formula is that of call warrant.


Warrant Focus - Fitters-WA Premium at All Time Low

Fitters Diversified Berhad securities had a brief surge in price and volume last week after the company announced its plan to implement one for two bonus issue.  The company also announced a substantial improvement in profits.  Fitters made RM2.57 million net profit in the first quarter this year, an 85% improvement over the same period last year. EPS reached 2.03 sen for the quarter.


Fitters-WA, which surged to a high of 21 sen last week, tumbled back to where it began before the announcement following the plunge in stock market late last week ahead of T+3 settlement today.  While the mother share also corrected, the percentage drop was much less and this has caused Fitters-WA to now trade at its lowest premium since it became listed.  Based on last Friday closed of 15.5 sen and underlying share price at 67 sen, the premium of Fitters-WA was 42.5%, it lowest level as indicated at the graph below.

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