Friday, June 15, 2007

HKEX-C1 to benefit from HKEX's bullish breakout

Recently, CIMB has issued 2 CWs for the underlying share of Hong Kong Exchange & Clearing Limited ('HKEX'). These CWs, HKEX-C1 & HKEX-C2 were listed yesterday (June14).

HKEX share price gained HK$1.60 (or, 1.7%) to close at HK$94.90 at the close of this morning session. As a result, HKEX has surpassed its recent high of HK$93.70 recorded in January this year. With this bullish breakout, I believe HKEX should have further upside (see the chart below). To check on HKEX share price, you can go here. HKEX's stock code 388.



Chart: HKEX's daily chart as at June 14 (courtesy of Yahoo Finance)

For this post, I shall ignore HKEX-C2- a Zero Strike Call Warrant over HKEX share- because it is too costly in absolute term. I shall concentrate on HKEX-C1. The main terms of HKEX-C1 are:
  1. Exercise Price: RM37.00 (or HK$84.90, assuming exchange rate of HK$1 : RM0.4358)
  2. Tenor: 7 months from issue date (May 30, 2007)
  3. Exercise Ratio: 10 to 1
Based on the underlying share price of HK$94.90, HKEX-C1 (closed at RM0.775 at the end of the morning session) is now trading at a premium of 8.2%. This is a substantially improvement to the premium of 17.23% at the date of its issuance (on May 30) when it was issued at a IPO price of RM0.635. This is because HKEX share price has gained 12.2% from an average price of HK$84.56 as at May 30.

Based on bullish breakout of the underlying share (HKEX), I believe HKEX-C1 (and, HKEX-C2) would be a good trading BUY.

This is strictly a technical call without any consideration of the company's financial performance & position.
at

1 comment:

  1. myfivesenMonday, June 18, 2007 11:35:00 AM

    Hi Alex,

    Some questions on these foreign CWs

    1. How closely does these CWs track the underlying? Is the market maker doing a 'good job'?

    2. For the CW-ZS, how does the issuer make its money? From the bid-ask spread? From the exchange rate they are imposing on to the price?

    3. Any ideas, what (and how much) is the fee about for redemption/selling? (Not talking about the brokerage and stamp duty)

    4. Anywhere we can get research on the foreign underlying, esp. the HK listed ones?

    Thanks!

    ReplyDelete