Introduction to Structured Warrants · of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain

STRICTLY CONFIDENTIAL

Introduction to Structured Warrants

Leong Kah Meng, CFA

Head of Warrants Sales, Malaysia

Macquarie Capital Securities (M) Sdn Bhd


Disclaimer

Please DO NOT download,

upload, post or otherwise make

available any material from this

webinar to the public without our

prior consent.

This presentation material has

not been reviewed by the

Securities Commission

Malaysia.

PAGE 3

Investment products including warrants are subject to significant investment risks, including the

possible loss of the principal amount invested

Where past performance is referred to, it is not indicative of future performance. Examples quoted in

this presentation are for illustration purposes only and does not represent any investment views or

strategies.

Advice should be sought from a financial adviser regarding the suitability of the investment product

before you commit to invest in it

Important information

PAGE 4

Disclaimer

The information is produced by Macquarie Capital Securities (Malaysia) Sdn. Bhd. (Company No 463469-W) ("MCSM") which is the issuer of the Macquarie warrants in Malaysia

(“Warrants”). The Warrants are guaranteed by Macquarie Financial Holdings Limited. The information is intended for residents of Malaysia only. No part of this presentation may

be copied, either in whole or in part, or distributed to any other person without MCSM’s consent. This presentation material has not been reviewed by the Securities Commission

Malaysia.

Any material provided herein, including any indicative terms are provided for information and educational purposes only and does not constitute an offer, a solicitation of an offer, or

any advice or recommendation to conclude any transaction. While MCSM provides the information in good faith and derived from sources believed to be reliable, MCSM does not

represent or warrant the completeness, reliability, accuracy, timeliness or fitness for any purpose of any of the material and it accepts no responsibility for the accuracy,

completeness or timeliness of the information.

The Warrants constitute general unsecured contractual obligations of the issuer and of no other person and the guarantee constitutes the general unsecured contractual obligations

of the guarantor and of no other person. If you purchase the Warrants, you are relying on the creditworthiness of the issuer and the guarantor and have no recourse/ rights against

the underlying corporation, the underlying exchange traded funds and the manager or trustee, the underlying index sponsor that compiles and publishes the underlying index and

the constituents companies of the index.

You are warned that the price or level of the underlying financial instruments and Warrants may fall in value as rapidly as it may rise and you may sustain a total loss of your

investment. You should therefore make sure you understand the terms and conditions of the Warrants offered, the risk factors involved. Do not invest in them unless you fully

understand and are willing to assume the risks associated with them. In preparing the information contained herein, MCSM did not take into account the investment objectives,

financial situation and particular needs of the reader.

Before making an investment decision on the basis of the information contained herein, you should consult, to the extent necessary, your own independent professional advisers.

You should read the full details of the Warrants, including the risk factors, which are set out in the most recent Base Prospectus and the relevant termsheet. Copies of the

documents may be obtained from www.malaysiawarrants.com.my.

MCSM is the market maker for the Warrants (acting through Macquarie Capital Securities (Singapore) Pte. Limited). The market maker may be the only persons quoting prices for

the Warrants on Bursa Malaysia Securities Berhad. Where past performance is referred to, it is not indicative of future performance.

Other than Macquarie Bank Limited ("MBL"), any Macquarie Group entity noted herein is not an authorised deposit-taking institution for the purposes of the Banking Act 1959

(Commonwealth of Australia). That entity's obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of

the obligations of that entity, unless noted otherwise.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Macquarie Capital Securities (Malaysia) Sdn. Bhd

(“Macquarie”). Standard & Poor’s®, S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark

of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by

Macquarie. Macquarie’s warrants are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any

representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

http://www.malaysiawarrants.com.my/

PAGE 5

Structured Warrants in Malaysia

Source: Bloomberg, as at 31 May 2020

RM0

RM500

RM1,000

RM1,500

RM2,000

RM2,500

RM3,000

RM3,500

RM4,000

Jan

-17

Fe

b-1

7

Ma

r-1

7

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-

17

Au

g-1

7

Se

p-1

7

Oct-

17

No

v-1

7

De

c-1

7

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-

18

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-

19

Au

g-1

9

Se

p-1

9

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Ma

r-2

0

Ap

r-20

Ma

y-2

0

Mill

ions

PAGE 6

Structured warrants performance

Source: Malaysiawarrants.com.my

Past performance is not indicative of future performance.

PAGE 7

Why warrants

Bull & Bear

Market

Gearing

Exposure

to foreign

exchanges

Less Capital


01What are structured

warrants?

PAGE 9

Types of structured warrants

Right to buy at a fixed price

Bullish view

Increase in value if the

share goes

Eg VS-C28

Put Warrant (H)

Right to sell at a fixed price

Bearish view

Increase in value if the

share goes

Eg FBMKLCI-HAI

Call Warrant (C)

PAGE 10

Structured warrant vs Company warrant

Structured warrant Company warrant

Stock Short Name HARTA-C43 / HSI-HAV GPACKET-WB

Issued by Third-party financial entity The underlying company

Primary use Investment tool Capital raising tool for company

Tenure Usually 6 to 12 months Typically 2 to 5 years

Expiry Settlement Cash or physical settlement Physical settlement

Market maker Yes No

PAGE 11

Index / ETF warrants

S&P 500® Index iShares A50Chin ETFHang Seng Index FBM KLCI Index

Index ETF


02Understanding key warrant

indicators

PAGE 13

Exercise Price

• The price at which investor can buy (calls) or sell (puts) the underlying share

or index at expiry.

• Intrinsic value = Current underlying price – Exercise price

RM0.30

Warrant Price

RM1.00

Exercise price

RM0.10

Time Value

RM0.20

Intrinsic Value

RM1.20

Current underlying price

Assuming an exercise ratio of 1:1

PAGE 14

Moneyness



• Exercise price is also used to determine the moneyness of a warrant.

• Call warrant is:

In-the-money (ITM) if current underlying price > exercise price.

At-the-money (ATM) if current underlying price = exercise price.

Out-the-money (OTM) if current underlying price < exercise price.

PAGE 15

Last trading day



• The last day investors are allowed to buy or sell the warrant.

• Falls on the 2nd trading day prior to the expiry date.

PAGE 16

Effective Gearing

Example: Warrant X has an effective gearing of 8x

1% change in share approx. 8% change in warrant

Higher effective gearing

Bigger movement in the warrant

Higher profit potential but higher risk

PAGE 17

Warrant sensitivity

• Shows investors how much the underlying share or index must

move for a corresponding one tick movement in the warrant.

• Example: There are 2 Call Warrants (A and B) with Bursa

Malaysia shares as the underlying. The price of Call Warrant A

moves up by 1 tick as Bursa Malaysia’s share price moves up by 6

ticks whereas the price of Call Warrant B moves up by 1 tick as

Bursa Malaysia’s share price moves up by 2 ticks. Which warrant

is more sensitive?

Answer is Call Warrant B.

PAGE 18

View all key indicators

Warrant Terms



PAGE 19

Warrant price vs Underlying price

INARI-C61 (016661)




03Selecting a warrant

PAGE 21

4 simple steps

Selecting a warrant

4. Liquidity of

the warrant

1. Take a view on underlying

markets

2. Set trading time frame

3. Effective gearing

The right risk and return balance

PAGE 22

Bullish or bearish view on underlying



Technical Event ® Lookup by Recognia

PAGE 23

Warrant expiry guideline

Trading Profile Warrant expiry to choose

Day trading As short as the same month

Short-term (up to 2 weeks) 3 to 6 months

Longer term (more than 2 weeks) More than 6 months

PAGE 24

What is warrant liquidity?

• Provided by the market maker/issuer.

• Parameters used to measure warrant liquidity?

1. High bid and ask volume.

2. Tight spread between best bid and best offer warrant price.

Source: Bloomberg


PAGE 25



Sold out warrants – What does it mean?

• Inventory sold out when inventory level is less than a certain threshold. E.g.

Total issuance size is 40mil units, warrant may be placed in the sold out list

when issuer’s inventory level is lower than 8mil units.

• How to determine whether a warrant is sold out?

1. The market bid/ask price is higher than the fair bid price on

Macquarie’s Live Matrix.

2. The market price movement of the warrant does not fully reflect

the price changes in the underlying share/index.


04Useful warrant

trading tools

PAGE 27

Malaysiawarrants.com.my



PAGE 28

Warrant Search



Step 3Step 2

Step 1

Step 4

PAGE 29

Live Matrix – Trade with confidence

INARI +3.5%

INARI-C61 +10.3%

Buy

Sell

1

2

3

4



PAGE 30



Live Matrix – Sold out warrants

PAGE 31



Warrants Calculator

1

2

3

PAGE 32

Telegram channel - Macquarie Warrants Malaysia

PAGE 33

Facebook Page - @MalaysiaWarrants

PAGE 34

Contact us for warrant matters

Call our

warrants desk

E-mail us

Warrants hotline

03 2059 8840

[email protected]

Documents

Introduction to Structured Warrants · of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain