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Call Warrants In Malaysia

PRODUCT SUMMARY

CASH SETTLED CALL WARRANTS

Description

• A call warrant is basically a derivative instrument which may be converted to its underlying share when its conversion price is paid within the exercise period.
• A cash settled call warrant is where the issuer does not have the underlying shares readily at hand and will have to settle by way of cash to meet the call warrant holders’ conversion in the event the underlying share price rises above the conversion price.

Background
• Number of call warrants which have been issued so far
in Malaysia, Singapore and Hong Kong is as follows:

No. of call warrants issued
Bursa Malaysia 124
Singapore Exchange 596
Hong Kong Exchange (including put warrants) 5379

• Call warrants are generally bull market instruments in the sense that they tend to do well when the markets are bullish and vice versa. As can be seen from the table above, the call warrant segment in HK and Singapore is huge and in the case of HK, contributes approximately 30-40% of daily volume traded. Bursa has also seen an explosion in call warrant issuance with the key players being CIMB & OSK. They have also started issuing call warrants on foreign stocks issued in HK, China and the US.

• Bursa Malaysia – 5 active warrants for the month of February 2008

No Stock Name No. of Warrants
Outstanding Warrant
Price (RM) Out / In-the-money Premium / (Discount) Maturity
Date
1 TENAGA-CF 100,000,000 0.005 Out 22.10% 04/2008
2 BURSA-CJ 100,000,000 0.040 Out 38.77% 07/2008
3 SIME-CB 150,000,000 0.095 Out 11.64% 07/2008
4 GENTING-CG 100,000,000 0.020 Out 10.22% 04/2008
5 GAMUDA-CE 80,000,000 0.135 Out 22.84% 07/2008

Risk Factors

• Unfavourable market movement for the issuer causing a conversion of the call warrants, resulting in a loss for MIMB. Benefit
• New product offering for remisiers
• MIMB earns a premium on the call warrants
issued.
For example:
Underlying share: A Bhd
No. of shares...