HoSE to develop other covered warrant products

November 24, 2021 - 08:34
Outside of HoSE's building in HCM City. Photo tinnhanhchungkhoan.vn

HÀ NỘI — The Hồ Chí Minh Stock Exchange (HoSE) plans to develop products like covered warrants bought based on underlying assets including indices/ETF and put warrant, to further improve covered warrant products on the Vietnamese stock market.

These products will diversify investment products, provide more investment tools and effective risk prevention.

The legal framework for covered warrant products has also been revised by the regulatory agencies in the direction of promoting the sustainable development of the covered warrant market, improving its attractiveness to investors and enhancing management and surveillance efficiency.

The draft circular to replace Circular 107/2016/TT-BTC of the Ministry of Finance on guidelines for the offering and transactions of covered warrants is being consulted on by organisations and individuals in the market. The new circular is expected to be issued this year.

HoSE said that covered warrants can bring high returns for investors, but are also a relatively complex, leveraged and high-risk product. Therefore, investors should learn about and understand the product before entering the market, especially the valuation of covered warrants.

When participating in the market, investors should pay attention to prospects of covered warrant’s underlying assets, issuers, covered warrant prices in the market and trading strategies.

After more than two years, the size of covered warrant issuance and listing has been constantly growing. As of September 30, there were a total of 414 covered warrant codes listed on HoSE, which were based on 26 underlying stocks issued by eight organisations, with a total volume of more than 1.1 billion covered warrants.

The total number of covered warrant codes that have expired or been delisted was 357. On average, there are 15 new listing codes and 13 expiring codes each month. Currently, the number of listed covered warrants is 57, which are based on 17 underlying stocks, with a listed volume of 321.9 million covered warrants, 15 times higher than the listed volume at the time of debut.

Since September 2020, the average daily covered warrant transaction value has surged many times. In the first nine months of 2021, the average transaction value of covered warrants reached VNĐ79.6 billion per day (US$3.5 million), up 268 per cent compared to 2020 and up 1,008 per cent compared to 2019.

Therefore, covered warrant products have a more important role in the stock market, bringing certain benefits to market participants and investors. It has contributed to the completion of the product structure of the stock market, and improved market liquidity.

With covered warrant product development, securities companies have opportunities to improve business activities, quality of operations, and add new business lines, creating more diversified revenue sources.

On the other hand, investors have more flexible, low-cost, high-leverage alternatives based on expectations of the underlying stocks.

The product also provides chances for foreign investors to indirectly invest in underlying stocks that are out of room because covered warrant products do not limit the percentage of foreign investors' ownership. VNS