Update On China Covered Warrants
These are volatile buggers and need to be monitored always. In the first few weeks when they were introduced, they were priced expensively and traded even more so. Somehow after the global tussle with subprime, almost all China covered warrants are cheaply traded (each warrant has an intrinsic value, usually priced in terms of its implied volatility and time value). Some are so ridiculously cheap, you'd think they are selling them at Petaling Street!
Company / Warrant Px / Premium / Gearing / Maturity
Category: Ridiculously Cheap Covered Warrants & Excellent China/HK Exposure
CCCC-C1 / 0.425 / 0% / 6x / 31 Jan 2008
CCCC-C3 / 0.115 / 8% / 15x / 4 Apr 2008
p/s CCCC-C3 is a lot better and cheaper as a buy & hold than C1
HKEX-C3 / 0.575 / 0% / 12x / 4 Apr 2008
HSBC-C1 / 0.155 / 7% / 40x / 4 Jan 2008
HSI-C1 / 0.40 / 0% / 24x / 29 Feb 2008
HWL-C1 / 0.275 / 7% / 13x 2 Jan 2008
Sinopec-C1 / 0.105 / 12% / 16x / 31 Jan 2008
Category: Cheap Covered Warrants & Good China/ HK Exposure
CNOOC-C1 / 0.105 / 15% / 6.7x / 25 Feb 2008
China Mobile-C4 / 0.40 / 4% / 6x / 28 Mar 2008
ICBC-C1 / 0.195 / 3% / 6x / 29 Feb 2008
ICBC-C3 / 0.18 / 0% / 6.5x / 2 Jan 2008
Petrochina-C1 / 0.185 / 8% / 6x / 29 Feb 2008
Petrochina-C3 / 0.165 / 7% / 6x / 17 Jan 2008
p/s Petrochina will be trading soon in Shanghai Exchange (within 2-6 weeks) and the IPO is priced close to the H-shares, I anticipate a jump of at least 40%-50% in the first few days of trading. This will spur buying of the H-share of Petrochina as well as its NYSE listing shares. Owing to the unique deliniation of investor pool - the Shanghai will trade at a huge premium to the H-share in HK, and you will find the NYSE trading at a discount to the H-share. The first 3-tiered share price for one single stock. Hence, for a strong speculative buy, the Petrochina covered warrants are the way to go.
Shenhua-C1 / 0.125 / 7% / 6.8x / 25 Feb 2008
24 comments:
Dali,
Why not CHMobil1? according to my calculations it is also trading at negative premium.
another thing is, when calculating gearing shouldn't the denominator (warrant price) also be converted into HKD first? Your calculations do not have this conversion.
Dali,
When Petrochina move to Shanghai, will the warrant still be trading in KLSE?
CHMobil will also be listed on Shanghai very soon. And so is China Shenhua. In the past, when china companies went for IPO in Shanghai, the corresponding h shares went up in tandem. Most recently, we've seen China Cosco H shares went up a few notches after the Shanghai listing. Let's see if Petrochina will have similar fate. Good call, Dali.
what are the listing dates?
old news said chmobil in july but it hasn't happened.
Petrochina in Nov?
edwin,
china mobile -1 is also good but its gearing is only half of China-Mobile-4, that is significant enough... plus u cannot buy everything.
my calculations are done via CIMB's warrants digest, u can recheck them there.No idea on listing dates but soon.
fazzy,
yes petrochina will ahve 3 listings then ... the covered warrant on petrochina in Bursa tracks only the px of the H-shares in HK. So if the Shanghai price goes ballistic but the H-share does not budge, the covered warrant in Bursa would not move.
if i look at gearing hsbc c1 have 40x gearing, much better than the rest ... will this be the best bet?better than cccc-c3?
Dali, how sure are u that Petrochina will be trading in Shanghai Exchange within 2-6 weeks time? can show us ur source ?
wind,
i read it somewhere from my daily readings of chinese papers n research (in english) ... i cannot recall the source... if the info is important for yr decision making, then forget i ever made that statement.
aiyah... why like this ...
lol, windsurfer,
thats the problem of the web when people type, there is no inflection, I am not angry or mad at all...
I really don't remember the source, so if u r making an important investment decision based on the info, you be better off to forget what i said on the listing dat... that's all... all said in nice calm tone... no sacarsm...
^_^
could this be it ??
http://resources.alibaba.com/article/173492/PetroChina_s_October_Shanghai_listing.htm
one more article in June saying listing earliest could be August... already Sep now... :p
http://finance.sina.com.cn/stock/y/20070621/07103710789.shtml
Here's another kicker... actually the plan for PetroChina to list in Shanghai can be trace back to 2004!!! or longer !!! ^_^
http://news.xinhuanet.com/fortune/2004-10/22/content_2124196.htm
PetroChina aims at Shanghai listing in November - http://uk.reuters.com/article/marketsNewsUS/idUKSHA9312920070712
HK-listed PetroChina to list on mainland as early as October - report - http://www.forbes.com/markets/feeds/afx/2007/08/08/afx3997779.html
i think i read somewhere that they have SET the IPO px already, which lends more weight to a proper listing... i agree there have been many false sightings in the past, i guess if they set the IPO px, that's a significant move on probability
hi Dali,
can you please explain why a 15 percent cap that will apply to CH-Mobil in HK index weighting as part of a quarterly revision to the benchmark index, will cause Chmobil to close lower recently?
u have a cap becos China Mobile might grow exponentially, hence its mkt cap might double every 12 months, if they do not put a cap, China Mobile could make up 20% or 25% of the index in a few years time... why the shares eased on the news is that the cap also means a cap for indexed funds in buying China Mobile, to me its a very small factor but after a certain point, u need not buy a more than 15% of China Mobile to track the index..
Thanks for the explanation, Dali
hi dali,
as i noticed that you only use premium, gearing and expiry for the evaluation of the warrants.
how about others factors such as the intrinsic value, comparing historical volatility against implied volatility and the theta/vega of it?
implied volatility is the most difficult to estimate but any deviation against the historical mean will give good intra/daily ideas for abitrage opportunity?..?
is there any way we can do if market maker fail to swap the bid-offer if the underlying has gone up/down by bigger margin? sometimes, in time of high volatility, they disappear or place the spread wide apart.
just curious and hope you can share your opinion. thank you
sops,
what u r asking is a bit too deep for me .... i think one must be able to calculate gearing and simple premium ... and have an understanding of beta, which is volatility. The new fangled term "implied volatility" is a new term to recalculate beta. Even if you do not know how to work out implied volatility, all u need to understand is the more volatile a stock is, the higher the premium. Warrants for them to be attractive MUST move, up or down ... worst type of companies to do warrants : Petronas Gas, Shell Malaysia, Nestle... u get the drift. Once you get a handle on premium and gearing, u r on yr way.
Dali,
Thanks for the reply. You mentioned, "Once you get a handle on premium and gearing, u r on yr way.", does it mean that I am on my own to decide if on the future movement of the CW? I think the underlying catalyst is the key to determining the drivers for the warrant. Thanks.
Post a Comment