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Thursday July 3, 4:38 PMWarrants trades up in Singapore, down in HK - SocGenSINGAPORE, July 3 (Reuters) - The value of structured warrants traded in Singapore jumped 21 percent but fell 41 percent in Hong Kong in the first half of 2008, and volumes in both markets are expected to remain flat this year, Societe Generale said.The French bank predicts turnover in Singapore to be little changed this year from last year's S$28.2 billion ($20.8 billion), while Hong Kong warrant volumes may recover to match last year's HK$4.7 trillion ($602.8 billion). SocGen's director for equity derivatives, Edmond Lee, told journalists that warrants traded on the Hong Kong bourse had reached saturation levels at 20-25 percent of total market value and would thus rise and fall in line with overall volumes. "According to our estimation, warrant market ratios at about 25 percent are the optimum, because if it's too much, it will create a lot of pressure on the hedging for the issuer," he said. In contrast, the Singapore warrants business is still at the incipient stage, accounting for 5-6 percent of the total market. About S$13 billion worth of warrants were traded in the first six months of 2008. SocGen is one of Asia's largest issuer of structured warrants, which are options that allow the holder to buy or sell a security at a predetermined price. Warrants offer investors exposure to a single stock or share index at a fraction of the cost and the chance to earn higher returns should the market move in their favour. According to SocGen, Singapore's overall market turnover slipped 15.6 percent, while Hong Kong's turnover tumbled 23 percent. At a separate briefing, Barnaby Matthews, head of derivatives at Macquarie Capital Securities, said warrants trading in Singapore may fall this year in line with thinning volumes on the Singapore Exchange. "We expect that warrant activity will move very closely in line with the markets. I think most practitioners out there are expecting still more hard times to come," he said. Macquarie says it has a 41 percent share of the Singapore warrants market. (Reporting by Yvonne Cheong; Editing by Kevin Lim) |
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