Warrant

-Vertical and horizontal warrant market

□ Li Songci, Head of Securities Derivatives in Asia of Goldman Sachs

Hong Kong stocks ended their three consecutive weeks of gains last week. The Hang Seng Index fell 470 points, or 1.9%, throughout the week. The average daily turnover of the Hong Kong stock market last week further fell from HK $84.5 billion the previous week to HK $72.7 billion the previous week, down by HK $11.8 billion or 14%. The average weekly trading amount of warrants also fell from HK $21.6 billion the previous week to HK $18.8 billion the previous week, down by HK $2.8 billion or 13%, the first time since August last year that the average weekly trading amount of warrants was less than HK $20 billion. On average, the warrant market accounted for 25.8% of the market turnover, up 0.2 percentage points from 25.6% the previous week.

In terms of distribution of warrant transactions, the Hang Seng Index became the most active warrant related asset in the whole week for the 16th consecutive week, accounting for 21.6% of the total warrant market transactions last week, down 2.3 percentage points from 23.9% the previous week. The average daily trading ratio of China Mobile related warrants in the overall warrant market last week was 12.9%, up 3 percentage points from 9.9% the previous week. The third to sixth related assets on the transaction list are respectively Guoshou (11.5%), CNOOC (7.7%) and CNOOC (7.3%) PetroChina And the national index accounting for 5.4%. The largest increase in the trading proportion last week compared with the previous week is China Mobile warrants.

In terms of changes in market holdings, based on the four trading days from April 14 to 17, the liquidity of HSI warrants remained at a low level. During this period, the market increased its holdings of 130 million HSI warrants and decreased its holdings of 74 million HSI put warrants in the same period. In terms of individual shares, China Telecom received the most warrants in the market. Warrant investors absorbed 470 million China Telecom warrants last week, which is one of the most sought after shares by warrant investors last week. The other warrant that has been absorbed more by the market is the A50 China Fund Warrants. Warrant investors absorbed 420 million A50 warrants last week. Last week, the rest of the shares of China Mobile and Guoshou, which were increased by a large margin in the market, were purchased 270 million China Mobile warrants and 260 million Guoshou warrants respectively.

If the face value of warrants is taken into account, a total of HK $290 million net inflow into the warrant market in the whole week, a third lower than the previous week's HK $430 million net inflow. Similar to the previous week, the inflow of funds throughout the week still focused on individual related assets. The A50 warrant became the stock with the largest net inflow of funds for two consecutive weeks, during which it received a total inflow of HK $94 million, accounting for 33% of the total inflow of funds into the warrant market. Over the same period, China Telecom's warrants received a net inflow of HK $68 million, accounting for 24% of the total inflow into the warrant market. As for the two major blockbuster stocks, China Mobile and Guoshou Warrants also received capital inflows of HK $53 million and HK $36 million respectively. The above four shares alone accounted for nearly 90% of the funds flowing into the warrant market last week.