The number of new warrants and callable bull/bear contracts (CBBCs) issuances will soar 30 percent in 2013 as the appetite for risky assets is growing amid the improvement of the global market sentiment, local warrant and CBBC issuer Societe Generale (SG) predicted.

According to SG, the number of new warrants and CBBC issuances has decreased 15.1 percent to 5,891, and jumped 13.7 percent to 6,064, respectively, in 2012. The decrease in warrant issuance number is due to the fall and volatility in the share market last year that crimped the incentive in warrants trading.

"Appetites for risky assets are rising as the investment returns from other asset classes such as bonds are diminishing," SG Director Edmond Lee said at the Monday press conference.

"The market valuations of mainland-listed A Shares, Hong Kong listed mainland company H Shares and Hong Kong-based company shares are all (at) very low (levels) compared to historic figures, (a factor) that may attract more capital inflows into the share markets, and thus propel more issuers to launch more of these leveraged derivative products as market volatility increased," Lee reckoned.

SG forecasted that issuers would be more willing to issue warrants and CBBCs on those share segments related to mainland-based banks, insurance, materials and cement stocks because of the gradual improvement of the mainland share market and the mainland economy; as well as the enlargement of infrastructure investment.

The issuance volume of new warrants that track A-Share Exchange Traded Funds (ETFs) as underlying assets are also tipped to increase in 2013 amid the possible rebound of the A-Share market due to the attractive valuation of the A-Share market and the possible launch of favorable economic policies by the central government, Lee reckoned.

According to SG, the callable bull contracts of CSOP A50 ETF and CAM CSI 300 ETF had attracted HK$120 million and HK$110 million capital inflows in November and December last year, respectively. In 2012, the callable bull contracts of X iShares A50 ETF had attracted HK$320 million capital inflow.

Lee also predicted that the combined turnover of warrant and CBBCs trading would take up a 25 percent share of the total market turnover in 2013.

In 2012, the combined turnover of warrant and CBBCs trading had occupied a 24 percent share of the total market turnover. In 2012, the daily total market turnover had plummeted 22.7 percent while the daily warrant and CBBC trading amount also tumbled 29.4 percent. The total combined warrant and CBBC trading turnover was slashed by 29.1 percent to HK$3.17 trillion in 2012, according to SG.

oswald@chinadailyhk.com

(HK Edition 01/08/2013 page2)