Monday, December 24, 2007

Malaysia Warrants and Call Warrants

I have involved in Malaysia Stock Market for sometime but I did not trade actively. Comparing with NYSE, Bursa Malaysia is a relatively small market and people say that it can be easily manipulated by some fund managers. Therefore, some serious investors in Malaysia only invest their money in Blue chip companies. Well, Learning USA market is my major focus as I think that USA market is more efficient compare with Malaysia Market. But I will still look into Malaysia's market to improve my general knowledge and to look for good opportunity to invest in some good stocks or products.

Recently, I did a research on Warrants and Call Warrants in Malaysia Market. Some people without much knowledge on the Warrants would say that it is risky to buy Warrants or Call Warrants. Actually I think that it is an interesting product that you need to spend sometime to understand before buying and the return could be many times greater than the ordinary share. It is only risky if you do know what you are buying. For your information, Malaysia Market does not allowed short selling, so, there is Call Warrants but not Put Warrants in Bursa Malaysia.

What are Warrants or Call Warrants?
Basically, these Warrants and Call Warrants are mainly for investors to have more choices in deciding their investment. These 2 products give the holder the right but not the obligation to subscribe a specific number of ordinary shares(Mother shares) at a specified price within a specific period.

Differences between Warrant and Call Warrants are as below:-

WarrantsCall Warrants
Maturity DateLonger(up to 10 years)Shorter(up to 2 years)
Issued CompanyThe Company itselfThird Parties

These 2 product must be exercised on or before the maturity date, if not it will expire and becomes worthless.

There are 2 categories of warrants:-
a. American-style - Warrants can be exercised at any time until the maturity date.
b. Europeans-style - Warrants can be exercised only at the maturity date.

As far as I know, there are 2 different types of settlement of warrants:-
a. Cash settled - you will get cash after you exercise the warrants
b. Share settle - you will get the mother shares after you exercise the warrants

No comments: