The return of warrants has many benefits. The key is to avoid repeating the mistakes

Trainee reporter Wang Yuxin

After being closed for 9 years, the warrant product, one of the financial derivatives, was re launched on August 22. 387.7 million Baosteel warrants（ information quotation forum ）In the past few days when it was officially listed on the Shanghai Stock Exchange, it has been warmly sought after by the market. On the first day of listing, Baosteel's warrants were directly opened at a ceiling price of 1.263 yuan, and were firmly sealed on the ceiling board by huge buying all day long. On the same day, there were more than 1.39 million deals, with a turnover of 175 million yuan. As of the closing, there were still 1.27 million yuan at the price of 1.263 yuan

Many hands waiting to buy. On the 23rd and 24th, it still kept rising.

Although many investors had expected that Baosteel warrants would be hyped up, they did not expect that it would be so crazy. So, what is the market prospect of the warrant products that were once short-lived in the early 1990s and are now re enabled due to the split share structure reform? What impact will it have on China's capital market?

　　 The return of warrants has many benefits

From the first warrant product, Dafeile Rights Issue Warrant, launched in Shanghai Stock Exchange in 1992 to the end of June 1996, the state terminated the trading of warrants. Warrants once had a history of about four years in China's securities market. As a trading tool, it once played a greater role in activating the securities market. However, due to the limitations of market conditions and regulatory level at that time, there was a very serious phenomenon of excessive speculation in warrant trading, which eventually led to the gradual fading out of the market of warrants as a financial derivative for nearly 10 years.

"The development of warrants will inject new impetus into the securities market." Liu Yuhui, a researcher of the Institute of Finance of the Chinese Academy of Social Sciences, said in an interview with the China Economic Times that the introduction of warrants can activate the market and provide investors with a new product, which will help improve the lack of investment product varieties in China. The pricing of warrants is generally low and easy to be accepted by investors, which is very effective in increasing transaction activity. In Hong Kong, the world's largest warrant market, the trading volume of warrants has accounted for about 20% of the entire securities market.

In addition, combining warrant products with the split share structure reform is conducive to solving the problems of insufficient financial instruments and single reform plan in the reform pilot, and providing more optional tools for pilot companies and investors. Liu Yuhui said that the introduction of warrants will change the current single long mechanism, make the market short mechanism, and effectively amplify the power of both sides.

Ba Shusong, Deputy Director of the Financial Research Institute of the Development Research Center of the State Council, also believed that, At present, the current trading system of China's securities market is not very conducive to the smooth development of warrant trading (such as how to divide, coordinate and link up the warrant system in laws, regulations, administrative rules, exchange business rules and other legal norms at different levels of effectiveness), but the introduction of warrants can accelerate the reform in these aspects.

"In the split share structure, if the first and second batch of pilot projects adopt more share bonus schemes, then, with the comprehensive promotion of the split share structure reform, the way of warrants has its own advantages in terms of expansion pressure, risk income, etc." Ba Shusong analyzed, especially in some listed companies, due to the small difference between the number of non tradable shares and tradable shares, The space for share delivery scheme is relatively small (for example, state-owned shares should maintain a controlling position), and the use of warrants can better solve this problem.

"Of course, the warrant scheme also needs to be carried out under the institutional framework of the whole split share structure reform," said Ba Shusong, "As a kind of consideration, whether warrants or share grants are the result of negotiations between non tradable shareholders and tradable shareholders. No matter what method is adopted, if no agreement is reached, the scheme will still be rejected. The use of warrants makes investors have an alternative way, but the consideration has not changed fundamentally."

　　 Avoid repeating mistakes

Experts interviewed by the China Economic Times said that the historical experience and lessons are worth learning. In the process of re launching warrant products, we must deeply study the problems existing in the past warrant transactions, constantly improve the current rules of warrant transactions, and strengthen the supervision of warrant transactions to ensure the healthy development of warrant transactions.

Liu Yuhui analyzed the reporter of China Economic Times that there are two main drawbacks of warrant products: first, warrants have a strong arbitrage function and have high requirements for supervision, especially for the supervision of margin. Secondly, the cost of trading warrants is relatively high. Warrants have a strong leverage effect. They often enlarge the amount of securities traded by 10 times and 20 times, which is relatively risky. Although it is not an independent securities type, it is better to establish an independent trading place

Liu Yuhui pointed out that China had initially established the warrant mechanism, but due to restrictions on conditions, the positive role of warrants, a derivative instrument, could not be played well. On the contrary, many problems have arisen, and some warrants have even been alienated into purely speculative instruments. This time, we must avoid this situation when we re enable warrant products.

However, from the perspective of China's financial system and product innovation, the introduction of a new short mechanism in the securities market, the gradual introduction of warrants, and the existence of a short mechanism or arbitrage mechanism will play a positive role in the development and improvement of China's capital market. Liu Yuhui said: "How about the effect of warrants in practice? It still needs market test."

　　 The role of the split share structure reform remains to be seen

At present, the introduction of warrants is mainly in line with the share reform. However, it remains to be seen whether it can cooperate with the share reform. Liu Yuhui told the reporter of China Economic Times that from the trading situation in the past two days, it basically deviated from the fundamentals of the capital market and did not reflect the value of derivatives. However, for this new product, its value needs a certain transition period, and finally returns to market rationality.

In an interview with the China Economic Times reporter, Ba Shusong also said: "At present, the introduction of warrants needs to be carried out after the share trading reform has a clear expectation of rights, which may have a relatively stable impact on the market."

Ba Shusong analyzed that, generally speaking, the elements of warrants include basic assets (here refers to non tradable shares), exercise price, term and exercise method. At present, the first element has been very clear, and the third and fourth elements are not a problem. The key is the exercise price.

Ba Shusong introduced that the determination of the exercise price is actually to give the valuation standard of the market after full circulation. At the beginning of the split share structure reform, the determination of the exercise price lacked a basis because of unclear expectations. For example, should the exercise price refer to net assets or other indicators? There was no answer in the environment at that time. When launching warrants in the expected unstable market environment, there is a problem whether the confirmation of the exercise price is reasonable, which may aggravate the turbulence and insecurity of the market. With the completion of the first batch of pilot projects for non tradable shares in China's stock market and the successive launch of the second batch of pilot projects, especially Yangtze Power（ information quotation forum ）Baosteel（ information quotation forum ）The pilot scheme of a batch of large market blue chips was clear, and the expectation was gradually clear. Compared with the questioning and wait-and-see attitude towards the split share structure reform at the beginning of the pilot, the market parties were more optimistic about the split share structure reform.

Related link: unfamiliar and familiar warrants

What is the warrant? "Right" refers to right, and "certificate" refers to voucher, which together means "voucher of right". Specifically, if it is issued by the issuer of the index securities or a third party other than the issuer, the agreed holder has the right to purchase or sell the underlying securities from the issuer at the agreed price within the specified period or on a specific maturity date, or collect the settlement difference in cash settlement.

As the third largest financial product in the global securities market except for stocks and bonds, warrants have developed into a mature financial product in overseas securities markets. In essence, it is an investment risk management tool. It has developed well in the United States, Germany, South Korea and Hong Kong Special Administrative Region of China, and has become the third largest financial instrument in the world financial market after stocks and bonds.

The functions of innovative warrant products mainly include three aspects: leverage investment, risk management and liquidity provision. Warrants will bring higher risks due to their own leverage effect while improving market efficiency.

Warrants have a short history in China's mainland securities market. In the 1990s, at the initial stage of the development of China's securities market, in order to protect the rights and interests of old shareholders in the rights issue, and enable old shareholders who are unwilling or unable to subscribe to the rights issue to transfer their rights issue with compensation, the Shenzhen and Shanghai Stock Exchanges once launched equity warrants. The first warrant product was Dafeile's rights issue warrant launched in Shanghai Stock Exchange in 1992. In 1993, the second batch of subscription certificates attracted a large number of buyers, even causing long queues and chaos. Due to the sharp rise and fall in the price of warrants, speculation was so serious that the regulators terminated the trading of warrants at the end of June 1996.