Market swings spur profit-taking in HSI-linked warrants

Market volatility, fueled by the new US reciprocal tariffs, has prompted investors to switch gears between put and call warrants linked to major stock indices.

On Tuesday, focus shifted to Hang Seng Index (HSI)-linked call warrants on Bursa Malaysia as the key index in Hong Kong rebounded to the 20,000 mark.

The HSI was Asia's worst performer on Monday following a widespread sell-off that impacted regional markets amidst escalating tensions from a US-led global trade war. 

This led to a frenzy in HSI-tied put warrants on the local bourse, with the non-collateralised instruments topping the most active list as prices surged between 137 per cent and 2,200 per cent.

At market close on Tuesday, the HSI climbed 1.51 per cent or 299.38 points to 20,127.68, reversing its previous losses from a close of 19,828.30.

HSI-linked call warrants were among the most actively traded on the exchange, with HSI-CWEI nearly doubling in price to 8.5 sen in the morning session before settling 5.88 lower at eight sen on a trading volume of 66.54 million units. 

These European-style warrants, issued by Kenanga Investment Bank Bhd, are set to expire on May 29, with a strike level fixed at 25,000.

Other HSI-linked call warrants actively traded yesterday included HSI-CWCT, which was down 9.09 per cent to five sen; HSI-CWC5, unchanged at 3.5 sen and HSI-CWC4, down 7.69 per cent to six sen, reversing early trading gains of up to 33 per cent.

The structured warrants, featuring a conversion period of less than four months, have strike levels set between 25,000 and 27,000.

Call warrants tied to an index, in this case the HSI, are securities that allow the holder to potentially profit from an increase in the index's value.

On the flip side, HSI-PWD3, topping the most active list, saw a decline of 5.88 per cent or half a sen to 8.5 sen with 245.41 million units traded. 

Issued by Kenanga Investment at 15 sen apiece on Feb 17, these put warrants are set to expire on May 29 with a strike level at 17,000.

Put warrants, in contrast to call warrants, allow the holder to capitalise on a decline in the index's value.

On Monday, Maybank Investment Bank Bhd-issued HSI-PWDZ, gained 2,200 per cent or 11 sen to 11.5 sen with 4.8 million units traded. 

Other HSI-linked put warrants that saw their prices surge in Monday's rally included HSI-PWD9, up 712.50 per cent from four sen to 32.5 sen; HSI-PWDM, up 200 per cent from half a sen to 1.5 sen; HSI-PWFK, up 185 per cent from 10 sen to 28.5 sen; and HSI-PWDS, up 137.5 per cent from four sen to 9.5 sen.

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