Series of lectures on covered warrants (II) Overview of overseas warrant market development
Ping An Securities Derivatives Department Zhang Shu
From the development history of warrants, there are equity warrants first, then covered warrants. The equity warrant was first issued by American Light&Power in 1911. In the 1960s, many American companies used equity warrants to raise funds. In the 1970s, listed companies attached equity warrants when issuing bonds to stimulate bond trading. Many investors were keen on investing in such financial products. The number of equity warrants issued by listed companies is limited, and the design of terms is not flexible enough to meet the diversified needs of investors, which limits the development of equity warrants. After the 1990s, covered warrants issued by financial institutions such as securities companies began to prevail in Germany, Hong Kong, Italy and other countries or regions, and gradually occupied a dominant position in the warrant market.
Covered warrants are flexible in design, convenient in trading, and have three major functions of derivatives, making them the first choice for financial innovation in emerging markets. In Asia Pacific emerging markets, covered warrants have become one of the most popular derivatives. Especially in Hong Kong market, covered warrants have developed very rapidly in recent years.
Hong Kong began issuing warrants in 1973. In 2002, after the introduction of such measures as the "banker system", the development of the Hong Kong warrant market accelerated significantly. From 2003 to 2005, Hong Kong has become the world's largest warrant market in terms of transaction amount alone. In 2004, the trading volume of warrants on the Hong Kong Stock Exchange reached US $67.337 billion. In 2005, the market share of the trading volume of warrants exceeded 20%, reaching 20.98%. In 2005, there were more than 2000 warrants traded in the Hong Kong warrant market, of which more than 99% were covered warrants. Recently, under the positive influence of QDII in the medium and long term, the mainland capital has been diverted into the Hong Kong market, which has a positive role in promoting the Hong Kong stock market shares Driven by the market, it has become more active, especially the Chinese financial equity certificates, which have become the most popular type of warrants in the Hong Kong market.
In addition to Hong Kong market, South Korea negotiable securities In the wave of foreign capital competing to issue warrants at that time, the Exchange also launched warrant products in 2006. At present, more than 1000 covered warrant products have been listed for trading. Other countries or regions, such as Indonesia, Taiwan, Singapore, Thailand and the Philippines, also have covered warrant transactions, in which Taiwan warrant market is listed for all covered warrants.
From the above development path of overseas warrant market, it can be clearly seen that covered warrants are the mainstream direction of warrant market development. In the past two years, China's warrant market has developed rapidly and achieved great results. However, the share reform warrants will soon withdraw from the historical stage, so covered warrants will also become a realistic choice for further development of China's warrant market. In fact, in the process of the development of China's warrant market, the cultivation of a large number of warrant investors, the substantial improvement of the market making ability and risk management level of securities firms have laid a solid foundation for China's introduction of covered warrants. (For more warrant information, please visit Ping An Securities warrant website http://www.pa18.com/warrants ）
