Securities companies are not only the biggest beneficiaries of the bull market, but also the "money printing machine" - put warrants.
“ citic securities (600030) The income from the establishment of CMB put warrants alone reached 1.05 billion yuan, while their net profit in the whole third quarter was only 4.155 billion yuan, accounting for nearly a quarter. " Liang Jing, senior analyst of Guotai Junan Securities, told reporters.
On October 29, Everbright Securities again created 33 million worthless put warrants of China Southern Airlines JTP1 (580989). This is just a small initiative created by securities companies. As of November 1, all the securities companies have created 10.763 billion shares of China Southern JTP1, and all the shares of China Southern Airlines (600029) are only 4.37 billion shares, which means that even if the securities companies shares Buyers are not enough for warrant investors to exercise.
Warrants become the source of profits for securities companies
The high returns from the creation of warrants are also shown in Haitong Securities (600837) Third quarter report. The company's performance in the third quarter rose by leaps and bounds, achieving a net profit of 2.056 billion yuan, which was basically the same as the net profit in the first half of the year. The sharp increase in investment income was the main driving force for performance growth, especially the income from the creation of warrants. Liang Jing estimated that the creation income from the CMB and China Southern put warrants reached 521 million yuan, accounting for more than 25%.
In the smaller Hongyuan Securities (000562). According to the calculation of Dong Xiaofeng, an analyst of Everbright Securities, the company realized a net profit of 946 million yuan in the third quarter, and the earnings from several warrants such as the establishment of CMB put brought about nearly 400 million yuan of revenue for the company, accounting for nearly half of the total.
Since securities companies started innovative business, the benefits brought by innovation to securities companies have never been as glorious as today, and all of this naturally thanks to the warrant creation mechanism of SSE.
On November 21, 2005, at the time of listing of WISCO Warrants (WISCO CWB1580013), the SSE issued the Notice on Matters Related to the Creation of WISCO Warrants by Securities Companies (hereinafter referred to as the "Notice"), and said that the creation business of other warrants since then should follow this Notice. Since then, the warrant creation business has officially stepped onto the stage.
However, after the "May 30" this year, due to the violent market shock, the warrant market led by the put warrants of China Merchants Bank was extremely active, and the speculation continued. As a mechanism to calm market speculation, the creation of warrants played a great role at this time. From the perspective of securities companies, the creation of put warrants is almost risk-free income. When regulators encourage the use of creation mechanisms to combat the bad habit of speculation, they naturally enjoy it and vigorously create CMB and China Southern Airlines put warrants.
Taking June 20 this year as an example, on that day, about 1227 million CMB put warrants created by 15 innovative securities companies were approved for listing, and their total listing scale exceeded 1/3 of the total market circulation of CMB put warrants at that time. Based on the closing price of the previous day, it is estimated that the secondary market needs 3.2 billion yuan to undertake capital that day. This large-scale creation also once set a new historical record for the establishment of warrants on a daily basis.
For securities companies, as long as they have sufficient capital strength, the creation of warrants is almost undoubtedly a huge profit opportunity. In this regard, CITIC Securities, the leading securities firm, is undoubtedly in the limelight. According to statistics, CITIC Securities, which made a profit of 1 billion yuan, created a total of 1.314 billion CMB put warrants.
Hedge or take charge?
A securities trader told the reporter frankly that so far, no securities trader has heard of any loss due to the creation of warrants. Even if some temporary losses, in fact, they are only floating losses on the book, which are profitable on the whole.
"After issuing the creation announcement, the securities dealers began to sell the created warrants in the market, and generally sold them within a few days. Because of the strong financial backing, it is easy for them to become dealers. At the craziest time in June, they did not worry about no one taking orders when they pulled up shipments." An insider who is familiar with the operation methods of the proprietary department of securities companies revealed to the reporter the way for securities companies to make profits.
Due to the current reality of the market, the put warrants will basically be worthless when they expire and become a piece of waste paper. After the creation and sale of securities companies, they can only buy back and cancel at an appropriate time, and even if they are not cancelled, there is no need to worry about someone exercising their rights. Take the put of China Southern Airlines as an example, its exercise price is 7.43 yuan, while the stock price is currently around 22 yuan, and the warrant will expire in June next year. "Unless there is a big change in the market, there is no possibility of exercise."
A person from CITIC Securities pointed out that the craziest time for warrants is Bo Silly. Some large-scale hot money will take the opportunity to operate in violation of regulations, resulting in heavy losses for a large number of small and medium-sized investors, which is really not conducive to the stability of the market. The existence of mechanisms can indeed curb this speculative atmosphere to some extent. However, he did not deny the profit seeking nature of securities firms. "Anyway, there must be such a process, either securities firms make money or others make money."
After China Merchants Bank put, China Southern Airlines put became the only put warrant that could be created in the warrant market. At the beginning of listing on June 21 this year, it was immediately surrounded by Tianliang's creation. At present, securities traders are still very interested in it, and nearly 4 billion of them were created in September, of which CITIC Securities, which is rich and powerful, accounted for half. Statistics from the Shanghai Stock Exchange showed that during this period, only Ping An Securities and Donghai Securities had written off in small amounts.
It can be predicted that on the put certificate of China Southern Airlines, the securities dealers led by CITIC Securities will gain another bumper harvest this time. According to Luo Yi, a researcher in the financial industry of China Merchants Securities, CITIC Securities created 1.97 billion put warrants in the third quarter. So far, another 500 million put warrants have been created, and the creation income will be 4.4 billion yuan at maturity. According to the research of Li Han, a researcher of Guojin Securities, CITIC Securities is expected to achieve a net profit of 16 billion yuan in 2008, which means that only the creation of a sale income of China Southern Airlines will provide a quarter of the contribution.
Compared with CITIC Securities, Haitong Securities, which is still a small brother, will increase its net capital from 5.2 billion yuan to 31 billion yuan through private placement, jumping from the sixth place to the second, second only to CITIC. "This means that the company will have 8 billion yuan of capital to invest in the creation of warrants after the additional issuance, and the potential income will reach 3 billion yuan." Liang Jing predicted.
"The scarcity of investment objects and the speculative impulse of investors will not make the warrant market peaceful", Huang Dong, a derivatives researcher of Orient Securities, believes that this phenomenon will be improved unless the management introduces covered warrants and expands the supply.
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According to Article 21 of the Measures for the Administration of Risk Control Indicators of Securities Companies, the cost of a securities company holding a non bond security shall not exceed 30% of its net capital.
Due to the extremely hot stock market in recent years, most of the securities companies have increased their capital and shares, so the net capital of the securities companies has also increased significantly, which has far exceeded the scale of their registered capital. Although CITIC Securities currently has an outstanding balance of 2.97 billion copies of China Southern Airlines JTP1, and needs to deposit 29.7 × 3.715=1.03355 billion yuan in the special account for performance guarantee funds, this is not a problem for CITIC Securities, which has just issued an additional 25 billion yuan.
China Business Daily: Li Hui
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