Covered warrants expected to attract many investors

11:04 | 08/06/2019
Covered warrants, which will be traded on the Ho Chi Minh Stock Exchange from this month, are expected to attract a large number of investors since they have lower investment costs and can be leveraged more than conventional financial products, a seminar heard in HCM City on Thursday.
covered warrants expected to attract many investors
Experts answer questions on covered warrants at a seminar organised by SSI in HCM City on June 6. The security is set to be traded on the Vietnamese stock market starting this month.-VNS Photo

Covered warrants are similar to derivatives. Investors have the right to resell the warrants on the market or hold them until maturity date, and they are always associated with underlying stocks.

Speaking at the seminar on Covered Warrants – Anticipating New Opportunity, Nguyen Duc Thong, securities derivative transaction director at SSI Securities Corporation, said covered warrants are a popular security on many developed markets.

Markets that have developed covered warrants such as Taiwan, Thailand, Hong Kong, and South Korea and Viet Nam's securities market have many similarities, including having high rate of individual investors, short-term trading accounting for a majority and large demand for using leverage.

Bringing such premium-structured products to Viet Nam was a correct and necessary step, he said.

Covered warrants would help diversify asset classes and help hedge risks in the context of market volatility, he said.

To issue them, securities companies must meet certain financial norms and obtain a permit from the State Securities Commission of Viet Nam, delegates said, adding that fewer than 12 securities companies are qualified to issue them.

SSI, the largest brokerage in the country, would issue six CW codes based on four underlying shares of FPT Corporation (FPT), Mobile World Investment Corporation (MWG), Military Commercial Joint Stock Bank (MBB), and Hoa phat Group Joint Stock Company (HPG), Thong said.

The company had instructed its brokers to provide investors with proper consultation before they trade the new product, he added.

VNA

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