The confusion of market observation on Baosteel warrants

-Reporter Lin Zhong, Li Qingmei

The warrants returned to the A-share market once every nine years. But the market has changed, investors have changed their faces, and the concept of the market has changed into the story of value investment. But Baosteel Warrant（ information quotation forum ）The speculation of listing made us see again the restless speculative heart hidden under the bear market.

　　 Does speculation deviate from reasonable value?

The trading limit of Baosteel's warrants on the first day of listing exceeded the prediction of all research institutions, and then three or four times of the huge turnover soared, which exceeded the market's expectations. Before the listing of Baosteel warrants, most research institutions predicted that the reasonable price for listing would be between 0.60 yuan and 0.8 yuan. Even the boldest prediction only considered 1.12 yuan and 0.46 yuan as the "top" and "bottom" of Baosteel warrants. Is the institutional forecast too conservative or the market too outrageous?

Jiao Jian, from the Financial Engineering Department of Ping An Securities, has been deeply studying warrants and other derivatives. He believes that "if you follow the BS model and Monte Carlo simulation, the reasonable pricing of Baosteel warrants is around 0.60 yuan to 0.70 yuan, it will not be much worse. Even considering the factors of the increase of the majority shareholders' holdings and the expected price of 4.53 yuan will not fall below, the price of Baosteel's warrants calculated by Monte Carlo model is only about 0.95 yuan, certainly not more than 1 yuan. "

In fact, based on the closing price of Baosteel's warrants of 1.83 yuan on Thursday, the positive stock price of the backward calculation should be 6.37 yuan, while its intrinsic value is only 0.04 yuan. As an important indicator to measure the risk of warrants, the premium rate has reached 39.4%, which means that the current stock price will rise by 39.4%, and investors will not lose until they exercise their rights at maturity.

However, this kind of judgment is too theoretical for actual operators. "It should be noted that the speculation of Baosteel warrants is not about the value, but about the demand for trading system reform. This strong demand for system reform and content innovation is far more than the actual value of Baosteel warrants." A senior market person commented.

For Mr. Zhang, who had the courage to participate in the speculation of Baosteel warrants on the second day of Baosteel's listing, he spent 10000 yuan on nine rounds in one day, winning six, leveling one and losing two, with an overall profit of 40%. This kind of real income has made him ignore the warning of risks.

　　 Why did you get so much hype?

According to the information obtained by this magazine, most of the funds had basically been around 1.7~1.8 yuan by this Thursday, short selling their Baosteel warrants, and some funds said that they "symbolically left a little, as a souvenir, to see how crazy Baosteel warrants will be." Although they were surprised at this unexpected small windfall far beyond the theoretical income, they were not impressed.

As for hot money, the theory is only gray. The performance has just begun, and all parties' funds have poured in. The price of Baosteel warrants has constantly broken people's imagination. In fact, there are many reasons why hot money can play this crazy game. It's strange not to be hyped.

The share of Baosteel warrants is only 387.7 million, and its market value is less than 500 million based on the first day of listing limit price of 1.263 yuan. It is like a small cap stock, and it is easy to operate hot money. As the first derivative in recent years, its scarcity obviously cannot escape the habit of market speculation. At the same time, Baosteel Warrants, a "small cap stock", is more attractive than ordinary small cap stocks because of its leverage effect and "T+0" trading advantages. It is far more likely to have a short-term wealth effect than the recent sharp rise in Shanghai local stocks.

Therefore, although many small and medium-sized investors also know that Baosteel's warrants have deviated from the reasonable value and signed the "Warrant Risk Disclosure Statement" required by the Exchange, they can't resist the temptation of quick money making effect and take out a small amount of funds to repeatedly sell high and suck low for entertainment.

Xie Bingzhi from the warrant research group of China Merchants Securities said: "Baosteel's positioning is high, which shows that it is an irrational behavior in the market. But from another perspective, it also shows that the market products are not rich enough, and there is a lack of derivatives like warrants to provide new opportunities for the market."

　　 Expansion to quell speculation?

From the perspective of overseas markets, warrants, as derivatives, have many functions such as price discovery, risk aversion, and improving the efficiency of capital use, which is also one of the important purposes of the Exchange to launch warrants. However, after the price of Baosteel warrants deviated excessively, these effects could not be realized.

The short-term Baosteel warrant seems to have become an independent financial product unrelated to the positive share price, and a game of fighting fools. Xie Bingzhi believes: "The lack of efficient and continuous creation and short selling mechanism is the main reason for the deviation of warrant price and value."

It has been reported that in order to curb the speculation of Baosteel warrants, Guotai Jun'an will prepare to issue covered warrants to increase market supply and curb the current trend of excessive speculation. In fact, as there are dozens or even dozens of warrants for large companies in the Hong Kong market, a complete change in the supply and demand relationship will effectively restrict the excessive deviation of prices.

In addition, short selling mechanism and market maker system are also effective means to suppress warrant speculation, but these two points are still difficult to achieve in the A-share market. At present, the management can strengthen the supervision, but so far, there has not been any statement of the management on the crazy speculation of Baosteel's warrants or the introduction of relevant mitigation measures.

　　 Is it "born out of time"?

When it comes to the supervision of warrants, Liu Yuxing, a Chinese born man with 10 years of investment banking experience, made an image analogy: "We saw that warrants are a good thing, so we took them for use. Just before using them, we cut and cut them, and after cutting them, we used frames to fasten them." Liu glanced at a box of paper on the tea table in front of him, "Just like this box of paper, only a little can be used."

Liu Yuxing, who describes domestic warrants as "a box of paper", is the executive director of Jutian Securities Investment Bank. He believes that warrants are "born out of time" in China. He said that there are various ways to classify warrants, but the implementation of warrants requires the regulators to have high regulatory capacity and means, and also requires their designers and investors to have a high ability to study and judge the future trend of their underlying securities.

"At present, we do not have such regulatory conditions, and 200-300 listed companies that account for 60% - 70% of the market value have not yet completed share reform, and launched warrants before the market expectation has stabilized, and the accuracy of their designers and investors' research and judgment on the underlying securities will also be greatly reduced." Liu Yuxing analyzed. In addition, after four years of bear market, market participants have suffered a great loss of vitality. However, after the rapid speculation of warrants, the risk is huge, and the takers are mainly public investors with small amount of participation. Therefore, from the perspective of regulatory environment, market conditions and social stability, the warrant products represented by Baosteel warrants are all "born out of time".

Liu Yuxing judged, "Since the current warrants mainly serve the share reform, it seems that China's warrants will be dominated by European style warrants, and it is impossible to launch more complex warrants, because the market does not have the environment to promote large-scale and complex warrants. Therefore, our warrants are at best just 'one box of paper'."

　 How big is the influence of speculative forces?

If Baosteel warrants are so hyped, will the next phase of the listing of Changdian warrants be like this? Will hot money force the fund out of the circle of long-term electricity warrants again? The number of Changdian warrants issued is 1.228 billion yuan. Analysts believe that the plate of Changdian warrants is about 3.6 billion yuan based on the widely expected 3 yuan per warrant, so this is not the same weight level as Baosteel warrants. Speculative power will be difficult to hype, but the "miracle" will not disappear.

Jiao Jian said: "If the warrant pricing of Baosteel and Changdian is not very reasonable and the market speculation atmosphere is too strong, then as an accessory product of the stock reform, I think the warrant products in the later period will probably be suspended for correction."

Market participants pointed out that the introduction of warrants stimulated the recovery of market speculation and met the demand of speculators. However, this excessive speculation has obviously diverted funds from the market, and the speculation of Baosteel warrants has made it impossible for institutional investors such as funds to use it to play the positive effects of derivative products, such as risk aversion. Its possible collapse in the future may instead amplify the negative risks, and the power of market product innovation will be distorted or even curbed in the future.

More importantly, the share reform has brought about the revival of Shanghai's local stocks, warrants and other speculative forces, which is clearly opposed to the value investment concept formed in recent years.

Although the market also needs the concept of diversification, in the specific moment of the stock reform, when the speculative power is too strong and the investment power is insufficient for a short time, what kind of variables it brings to the market needs further observation.