Commerce-CC listed today

I have missed out on the listing of Commerce-CC today. This may become a more frequent occurrence as more & more issuers get into the act of issuing new CWs. In the past, one can get the news of a new CW coming up from CIMB via its Financial Portal or from OSK via its OSK188.com. Commerce-CC is however issued by AMInvestment Group, which I do not track. Of course, one can get the information from Bursa's announcement section, but that section is getting too crowded as more CWs are issued.

Commerce-CC has returned a bit of normality or sanity to the CW's pricing after 2 earlier batches of CWs, which were issued with excessively high exercise ratio, opened at premium of 40-50%. Commerce-CC, which traded at premium of 13-16% for most of today, is still on the expensive side. This maybe attributable to a drop in the underlying share price yesterday & today. This drop in the underlying share price was also seen on the listing of Commerce-CB on February 9 (see Chart 1 below), which could be due to cash extraction by the holders of the underlying shares. Cash extraction is a form of risk management whereby the investors sell off some of their investment in the shares (to realize their profit) but continue to have an exposure in that stock by buying its CWs. As witnessed in the 2 weeks' period after the listing of Commerce-CB, the underlying share price & the price of Commerce-CB did recover. However, Commerce-CB's price has since drifted lower as its premium of 10% (or more) was probably considered by the market to be on the high side (see Chart 2 below).

Looking closely at Chart 1, I believe that the downside for Commerce may be limited as the share price is approaching its 20-day SMA of RM10.10/20. We can also expect the RM10.00 psychological support to kick in. A rebound in the share price from this point onwards may see it testing its recent high of RM11.00 again. As for Commerce-CC, we can expect support at its IPO price of RM0.33, which is just 3 or 4 sen away from its closing price of RM0.365 today. It will very likely to benefit from any rebound in the underlying share price. As such, I believe Commerce-CC could be a relatively safe trading buy at RM0.33.





Chart 1: Commerce's daily chart as at April 12



Chart 2: Commerce-CB's daily chart as at April 12