Skip to main content
Single Stock Futures - Great Introduction

This is even better that regulated short selling as it has less variables and outlay, for about the same effect. The difference is the time limit, which still can be overcome by rolling the futures contract. Naturally, the leverage is the big thing. To me, single stock futures are akin to warrants, only less cumbersome. At least we don't have to worry about gearing, beta, time to expiry, in/out of money and volume issues. Mind you, these single stock futures will also have similar variables but they are not as decisive or delicate as for warrants.

It is likely that there will not be any expiry but settlement end of each day. The outlay is likely to be about 20% of normal exposure or a gearing/leverage ratio of 5x. An investor would only have to worry about topping up the required margin as these contracts will be marked to market at the end of each day. Single stock futures could very well decimate the potential for short selling. The KLSE is not deep enough a market to support two quite similar intruments. Bursa Malaysia is introducing SSFs on April 28, with 10 stocks as a start. The 10 form part of a list of 42 stocks shortlisted for SSFs.

Kicking off this first tranche are Bursa Malaysia, AirAsia Bhd, AMMB Holdings Bhd, Berjaya Sports Toto Bhd, Genting Bhd, IOI Corporation Bhd, Maxis Communications Bhd, RHB Capital Bhd, Scomi Group Bhd and Telekom Malaysia Bhd. The stocks were selected based on the structured warrants guidelines. Bursa has also obtained the commitment from 50 quasi market makers to play the role of market makers for the SSFs, and expects that number to swell to 100.

While the SSFs is a good thing, it does nothing for market fundamentals. What it does is to give investors things to do if they are bearish on the market/certain stocks. If they are savvy enough, they could do a market neutral hedge fund of their own - this means picking stocks correctly regardless of whether the market goes up or down. If I was creating a market neutral hedge fund, I would go long on Bursa Malaysia and Genting. At the same time, I would go short on Air Asia and RHB Capital. So technically, no matter in a very bullish market or a deep correction, the fund would still come out evens. The returns from the fund would come from picking the stocks that will move up more compared to the ones we shorted. (While I like Air Asia as a company, their share price is prohibitive, no room for mistakes).

Investors will have to appreciate beta or volatility, the volatility between Petronas Gas and Genting is quite wide a berth. The more volatile a stock is, the better it is as a stock future. That is one area which Bursa has missed out. Pick large caps but also stocks with high beta as a preference. A Petronas Gas stock future would yield very low turnover and interest.

Comments

zentrader said…
Very timely report. Hope to see your write more articles related to SSF and how to really profit from it (as the hedge fund that you mentioned about). Thank you very much.

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…