Foreign share call warrants

Lately there has been a number of foreign share call warrants issued by our local investment banks, namely OSK and CIMB. OSK being the pioneer has successfully launched China Mobile, ICBC, and PetroChina CWs on the 5th of June and to date all three are still trading above subscription price. In case you did not notice, the CWs issued by OSK have exercise prices denoted in HKD. Meanwhile the ones issued by CIMB are denoted in RM. I bet many would have known how to value a CW based on its premium/discount, implied volatility, gearing, and etc. But in the case of foreign share CWs, we must take into account another factor which is the exchange rate. The appreciation on our currency (RM) against the foreign currencies (in this case, HKD or SGD) , will reduce the value of these foreign share CWs. If HKD and SGD were to appreciate against RM, the foreign share CWs will have a higher value.

As for the new listings, I have computed the premium and percentage gain in price for HSBC-C1 and SingTel-C1. Based on the performance of previously listed foreign share CWs issued by OSK, I reckon these CWs would also be trading around 20% to 25% premium on the first and second day. Referring to the table above, HSBC-C1 would be trading between RM1.07 to RM1.38 (69% to 119% gain), and SingTel-C1 trading around RM0.745 to RM0.935 (18% to 48%). It seems that HSBC’s CW has more upside potential than SingTel's.