Macquarie enters local warrants market

KUALA LUMPUR: Macquarie Securities Group, the latest entrant to the local structured warrants scene, sees potential in Malaysia despite the lacklustre performance in the market currently.
Structured warrants give holders the right, but not the obligation, to buy or sell the underlying instrument in the future for a fixed price. It offers investors an alternative avenue to participate in the price performance of an underlying asset at a fraction of its price.
Macquarie Capital Securities (Singapore) Pte Ltd head of derivatives for Southeast Asia Barnaby Matthews said Malaysia has been one of the top performing stock markets in the region in the long term, despite the markets coming off this year.
"Malaysia has strong demographics and a large growing working population that is likely to transform into large retail investors, which is important for the vibrancy and growth of the warrant and stock market. We're optimistic that Macquarie can contribute to the growth of the market," he told a media briefing at the inaugural listing of Macquarie Securities' structured warrants here yesterday.
On Malaysia's position as one of the markets with the lowest penetration rate in the region, especially for structured warrants, Matthews said he sees challenges as opportunities and looks to index warrants as an area of growth. Index warrants are still comparatively undeveloped in Malaysia and typically index warrants contribute over 50% of the daily warrant turnover in a warrant market.
"Encouraging more active day trading is going to be a challenge. There are structural changes that would help and one of the things is the transaction cost in Malaysia that is higher than other markets. If you really want to boost activities on Bursa Malaysia, you have to drop the transaction cost," Matthews said.
He said structured warrants in Thailand have grown quickly and believed Malaysian investors are more sophisticated than Thai investors in response to structured warrants.
"The size of the market here is comparable to Singapore but you don't have the day trading that contributes to the turnover," Matthews said, adding that Malaysian investors are merely holding warrants but not trading them.
Macquarie expects to list 32 structured warrants on Bursa Malaysia in a series of tranches in October that will bring the total number of structured warrants listed in Malaysia to 463 from 431.
Its first issuance yesterday was for AirAsia X Bhd, Berjaya Corp Bhd, DRB-Hicom Bhd, Hong Leong Industries Bhd, Inari Amertron Bhd, KNM Group Bhd and MY EG Services Bhd.
Macquarie Capital Securities (Malaysia) Sdn Bhd chairman Paul Ow said Macquarie is already the number one issuer of structured warrants in Singapore, number two in Thailand, number four in Hong Kong and it is hopeful Macquarie will be the top three issuer in Malaysia in the future.
"We're planning to be in Malaysia for the long term and we see a lot of potential in this market. We're looking forward to working alongside Bursa Malaysia to develop and grow the structured warrants market here," Ow said.
Matthews said as the leading warrant issuer in Asia, Macquarie is the only issuer that is active in four warrant markets across Asia. Macquarie is the first independent issuer in Malaysia not affiliated with a local retail brokerage house.