Wednesday, April 04, 2007


Slow Death

It is sad to be right sometimes. The slow death being witnessed in the new covereds, namely: Genting-CD, PBB-CB and YTL-CB, is sad and unstoppable. Sad because the bulk of the buyers have to be retail players. No institutional investor would be buying these covereds at these valuations. Looking at the selling, the holders are still starry eyed, there is still a long way down to go.

Sad because no one in the business papers are writing anything to warn them, maybe all are also involved?! Bursa should take some responsibility in that it has FAILED to educate the masses on covereds. Just offering courses is insufficient, have to make it reaches the critical mass of players by hook or crook. Even brokers have not done enough to educate remisiers and dealers. It is sad cause there will be no more buyers very soon for these 3 covereds, and buyers yesterday could very well lose 50% or more within 3 days or contra.

Should retail players learn the hard way that absolute cheap prices do not apply that well in covered warrants as in normal shares. Normal penny stocks can still be played up, syndicate wise, or you can still lock up penny shares waiting for the next turn of the century to make back. But not these covered warrants because they have a tangible value and a time to expiry. No syndicate is going to touch that, as they may be left holding a bag that will be worth nothing should things go wrong. Can go to zero very fast-la auntie .. sigh...

4 comments:

dummy said...

How much will CIMB / OSK make from this call warrant business? Thanks

Salvatore_Dali said...

depends on a lot of stuff, mainly how they manage the risk, and how they get the shares and at what price... sau, if i can get a package of 2m Telekom shares from a holder and ask him to give me an option for delivery anytime within 9 months for a premium of say 30sen per share, i basically covered my exposure, if share runs, i basically ask for the balance in the money from the client or take the shares and sell into open mart to cover... i may be able to sell the covereds at 80sen, so i pocket 50sen clean... thats one way,

the other is to get some from gthe open mart and manage and trade the risk away on a daily basis, thats harder, and probably why a lot of brokers dont know how to do it... its not easy and the biz is not as lucrative unless you build a good franchise..SD

The Mumbling Priest said...

Used to tell people that CWs have their death certificates written the moment they're born... many don't care. Everyday, you lose time value, both in terms of interest (carry) & especially the possibility of the mother going up.

Do the issuers make a lot from CS biz? I guess they make enough to pay some bills. But if you're thinking whether they are making from the ridiculous market prices, it depends on whether they have any left after the placements.

Oh, did anyone notice the trend for 10:1 CWs? hahahaha cheaper per unit but bloody ridiculously over-priced all-in. Some people just don't get it! That's why CIMB is following OSK's tracks. Beware!

dummy said...

Thanks. Any possibility of the issuer to maintain an open exposure? very high risk or dumb to do so?