SINGAPORE, 30 December 2008 – Singapore investors are turning to Hang Seng warrants in the current challenging market environment, according to Macquarie Capital Securities (Singapore) Pte. Limited (“Macquarie”).
The Singapore warrant market actually increased its activity during the 4th quarter, with November recording the highest average daily turnover in the market since May this year. Activity in the broader share market fell during this time as the warrant market’s share of turnover increased from 4.7% to 6.5%.
Most of the rise in activity can be attributed to index warrants, with investors favouring warrants over the Hang Seng Index (HSI). The HSI warrants, contributed more than 72% of the turnover in the warrant market in the 4th quarter. Hang Seng warrants provide investors with exposure to movements in the Hong Kong market.
Mr. Barnaby Matthews, Head of Derivatives Singapore, at Macquarie said investors were attracted to HSI warrants, in part, due to the increased level of volatility in the markets. “Index warrants are well suited to a volatile environment because they allow investors to get exposure to the market as a whole and remove the risk of being exposed to individual stocks,” said Mr. Matthews.
“Given the current market environment, it is not unusual for investors to be drawn to index warrants, as the huge daily movements provide opportunities for traders.”
Mr Matthews said the increased popularity of warrants over the HSI index as opposed to the local STI index is due to the high liquidity and volatility of the Hang Seng index market. However, he is confident that over time the local index warrant market will continue to develop.
Macquarie has dominated the HSI warrant market in Singapore in recent times with more than 93% market share over the quarter ending 29 December 2008, giving Macquarie 68% share of the total Singapore warrants market over the same period.
Active counters in the warrant market for the quarter included DBS, UOB and Capitaland. Activity between put and call warrants was relatively balanced, with put warrants representing 42% of turnover in the market, against the call warrant volume of 58%.
Put warrants allow investors to potentially gain from falls in market prices. The past two quarters have seen a pick up in activity traded in put warrants as investors look to profit from falls in the market.
Macquarie has built a solid reputation as one of Asia’s premier Warrants issuers and is the biggest issuer of warrants by market share in Singapore. For the year ending 29 December 2008, Macquarie had 51% market share of the volume traded on the Singapore warrants market.
Macquarie takes a leading role in educating retail investors about how to invest in warrants. Macquarie runs regular seminars, operates a free-call warrants telephone number and distributes a free, daily e newsletter that contains the most up-to-date market information.
About Macquarie Group
Macquarie Group is a global provider of banking, financial, advisory, investment and funds management services. Macquarie’s main business focus is making returns by providing a diversified range of services to clients, acting on behalf of institutional, corporate and retail clients and counterparties around the world. Founded in 1969, Macquarie operates in more than 60 office locations in 27 countries and employs more than 13,800 people. Assets under management total more than $A239 billion. Macquarie Group Limited is listed in Australia (ASX: MQG).