Baosteel CWB1 yes Baosteel European warrants separated from separable bonds were listed on July 4. The warrant is a warrant for newly increased capital stock, that is, the warrant holder can buy one newly issued Baosteel share at a price of 12.50 yuan five trading days before the expiration of the warrant.
The exercise price of Baosteel CWB1 was 12.50 yuan, and the closing share price of Baosteel shares on July 3 was 8.5 yuan, which belonged to the out of price warrant, and the indicator A was -0.26 yuan. China's warrant market is in the early stage of development. The only T+0 trading variety and the small overall scale make the warrant market price deviate from the theoretical price calculated by the B-S model to a certain extent. In addition to the future expectation of the underlying stock, the factors affecting the price of warrants also include the average implied volatility of the market, the size of warrants, premium rate, leverage ratio, remaining time, and the rate of return created by securities firms. Therefore, the use of relative valuation methods is more suitable for Chinese warrants at this stage.
In order to study the relationship between the in price level and premium rate of warrants in China, we created an indicator A=intrinsic value/exercise price, which can compare the in price degree of warrants with different underlying warrants. Among the existing call warrants, the index A of Sinopec CWB1 and Guoan GAC1 is close to Baosteel CWB1, with the implied amplitude and premium rate of 104.24% - 136.43 and 109.80% - 178.80% respectively, while the number of outstanding shares of Baosteel CWB1 is 1.6 billion, which belongs to the warrant with relatively large circulation, similar to Sinopec CWB1.
Baosteel CWB1 is an equity warrant. Although at this stage, securities companies cannot create it, and there is no creation risk, the circulation of 1.6 billion shares will curb speculation to some extent. Therefore, we believe that there is little possibility of substantial speculation in the initial listing of the warrant, and the implied volatility and premium rate in the initial listing will reach about 110%. When Baosteel CWB1 is listed at the initial stage, when the share price of Baosteel shares is 7.80-8.60 yuan, the price of Baosteel CWB1 will reach about 1.856-2.340 yuan. It is suggested that investors can choose to sell it in the short term when the price exceeds 2.40 yuan. If investors are optimistic about the steel industry for a long time, they can choose Wuhan Iron and Steel CWB1 or Maanshan Iron and Steel CWB1 with relatively low valuation level.
Guojin Securities Fan Xiangpeng
