CIMB : MALAYSIA NEEDS MORE CALL WARRANT ISSUERS

(Business Times (Malaysia) Via Thomson Dialog NewsEdge) CALL warrants are crucial in boosting market volume and they are in great demand from retail investors, but Malaysia will need more issuers - typically investment banks with adequate capital and infrastructure - to grow this product, CIMB Group says. A market leader in the area, CIMB Group currently issues 85 per cent of call warrants in the domestic market.

"The number is way too high. We hope to see more players here," Datuk Nazir Razak, chief executive officer of CIMB Group, said yesterday in Kuala Lumpur. Unlike in Singapore and Hong Kong where there are more than 10 issuers in the market, only three players are issuing call warrants in Malaysia - CIMB, AmInvestment Group and OSK Investment Bank Bhd.Nazir said the warrant market holds great potential since the number of issues here is just a fraction of that of the more established markets such as Hong Kong and Singapore. Over the past three years, the Malaysian market has seen just under 50 new issues. Comparatively, Singapore, which launched the product in 2005, has had more than 400 issues a year, while in Hong Kong, there are over 1,000 new issues a year.

Nazir said demand for the product is big, especially from retail investors. This is because call warrants give them the exposure to underlying blue-chips at a lower cash outlay and provide leveraged exposure - with higher upside and downside than the mother shares themselves.

"Call warrants would also help address the low trading-velocity problem on Bursa Malaysia as the product has high trading volume. The hedging activities of the warrant manufacturer would create more activities in the underlying shares too," he added. Still, Nazir said the high level of infrastructure, risk management and capital required of a market maker mean that only banks with such capabilities can afford to issue call warrants.

"We are committed to market-making ... CIMB is there to buy back and sell and that's important. If investors want to sell, there'll need to be a buyer ... the liquidity is crucial to provide confidence to investors," he explained."It's a game for the banks and not the small, niche brokers," he added.

The banking group yesterday launched a public website called CIMB Warrants Portal, providing investors with education and information that they will need in trading call warrants. Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff, who launched the portal, said many investors have been attracted to warrants lately due to their relatively cheaper entry points compared to blue chip stocks.

"There is a lot more to warrants than just their pricing, and all these factors are vital for investors to know," he said. Yusli said more call warrants should be issued to increase market volume, adding that the current value is about RM85 million.

Call warrants in Malaysia now account for over 5 per cent of the total market volume compared with less than 1 per cent before 2005, when the Securities Commission revised guidelines to allow faster and simpler issuance of call warrants.

source : http://www.tmcnet.com/usubmit/2007/02/05/2311703.htm