Friday, August 07, 2009

AmInvestment Bank Launches Put & Call Warrants

AmInvestment Bamk took advantage of Bursa’s new guidelines, which took effect on Aug 3, which allows put warrants to be issued in addition to call warrants. The HKEC put and call warrants are issued at 20 sen and 18.5 sen respectively. They are European-style cash-settled, which means investors can only exercise the right until maturity date. The exercise price is HK$143.90, which was the closing price of HKEC on Wednesday. The warrants have a tenure of 18 months with an exercise ratio of 125 warrants to one HKEC share.

AmInvestment Bank chose HKEC for its long-term prospects and short-term trading volatility. The stock historically had price movements of up to HK$16.95, or 27%, a day.

AmInvestment Bank has also introduced its warrant trading portal,, as a tool for the public to source for term sheets and prospectuses of its issued warrants, as well as access live pricing of all the warrants listed in the country and the underlying shares of these warrants.

My worthless views:

a) excellent move to allow put warrants by Bursa (after screaming my head off so many times in the past)

b) excellent move by the team at AmInvestment Bank to launch a pair of put and call instead of just a put warrant as this will allow for same-same comparison, peer-to-peer valuation, instead of just one directional bet. This will give investors more confidence in terms of valuing and trading the put warrants as it is new to the market place.

c) the put and call pairing will reduce "manipulation excesses by investment banks launching call warrants" as investors themselves can hedge the volatility and mispricing if one of the warrants get out of whack in valuation - previously the 'banker' will rub their hands gleefully when the call warrants traded at excessive premiums in the first few days... allowing the banker to keep selling call warrants and locking in great premiums.

Looks like the market place is growing up, good sign all around, the guys at OSK warrant issue desk may be bitching about this however, no more easy profits.

p/s photo: Yu Takahashi


Superman said...

Don't know when will Malaysia will come out with Call and Put Option like those in Australia.

Digital said...

Finally, someone make the right decision i.e to introduce Put and Call Warrant. Hope Bursa/SC learn from their past mistake before introducing any new policy or guidelines.

For AmInvestment Bank, congratulation and keep it up for the good work and for the rest of the investment bank, you got to wake up now.

Tony said...

with conversion ratio of 125!! The underlying moves a massive 62 HKD and the warrant intrinsic value is just 50 HK cents; just about break even on the issue price!! I wish local issuers would be more adventurous and have lower conversion ratios like those at SGX.