Changes to the Singapore Exchange ("SGX") listing rules that were made in late 2003 now require warrant issuers to appoint a Designated Market Maker (“DMM”) to provide liquidity in warrants. Before these changes warrants were often illiquid, making it difficult to buy and sell. The appointment of a liquidity provider means it is easier for you to buy and sell warrants at any time. Macquarie’s expertise is in providing you liquid markets.

Gearing

Warrants cost only a fraction of the price of shares. However, they can provide investors with greater exposure to share price movements as their prices generally rise and fall more steeply than shares in percentage terms. This increased exposure can subsequently offer greater potential profit as a percentage of the capital invested.

Conversely warrants also expose investors to greater potential loss in percentage terms. However, you are never obliged to pay anything more than the initial price of the warrant, so the maximum amount you can lose is limited to the price paid.

Our hypothetical example in the pricing variables page illustrates the relative price movements of a call warrant and a put warrant against corresponding movements in the underlying share price.

No margin calls

Even if the underlying share or index moves adversely, warrant investors cannot be asked by the issuer to make margin calls.

Contra trading

Some stockbrokers may allow investors to trade warrants on Contra thus increasing leverage to share price movements. Investors should be aware of the higher degree of risks involved in this strategy.

Low transaction costs

Generally brokerage and associated transaction costs are reduced when trading warrants because the price of Warrants is usually less than the underlying share price.

Ease of trade

Warrants are traded on the SGX allowing investors to buy and sell warrants just like shares.

Portfolio Protection

Warrants can be used as a form of insurance to protect an existing share portfolio against a falling market. An investor with a holding in a particular stock who was nervous about the future direction the market could purchase put warrants instead of selling shares. This would allow the investor to retain share ownership without realising capital gains and without having full exposure to the downside risks. Investors should, however, understand the complexity of utilising Warrants for hedging or portfolio protection purposes. For example, the value of the Warrants may not exactly correlate with the value of the underlying share.

Hedging

Call Warrants can be used to hedge against future price increases. An investor interested in purchasing shares who did not have immediate access to funds could purchase call warrants to capture the benefits of an anticipated price rise. This would allow the investor to establish a price (the exercise price) from which they have exposure to the shares in the future.

Releasing share capital

Call Warrants can also be used to free up capital invested in shares. An investor may sell existing share holdings and purchase a corresponding number of Call Warrants for a fraction of the price. The investor has maintained exposure to share prices while releasing capital from the security holding.

While Macquarie Capital Securities (Singapore) Pte Limited ("MCSSPL") provides the information in good faith and derived from sources believed to be reliable, MCSSPL does not represent or warrant the completeness, reliability, accuracy, timeliness or fitness for any purpose of any of the material and it accepts no responsibility for the accuracy, completeness or timeliness of the information.

This internet site is produced by 'Macquarie Warrants Singapore - Macquarie Capital Securities (Singapore) Pte Limited (Registration No 198702912C)', holder of a capital markets services licence under the Securities and Futures Act, Chapter 289 of Singapore. The information on this internet site is directed and available to residents of Singapore only and is not provided to any person who is a resident of the United States or any other country. Any material provided on this internet site, including any indicative terms are provided for information purposes only and do not constitute an offer, a solicitation of an offer, or any advice or recommendation to conclude any transaction (whether on the indicative terms or otherwise). We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The price of warrants may go down as well as up and there is a risk that an investor may lose some or all their investments. Past performance is not indicative of future performance.

Please visit the following webpage: Company Disclosures for disclosure of corporate finance relationship with the Macquarie Group.