Dealers dazzled by sharp futures push

PUBLISHED : Thursday, 28 September, 1995, 12:00am
UPDATED : Thursday, 28 September, 1995, 12:00am

OCTOBER Hang Seng Index futures got a big push yesterday, rising 73 points to 9,686, a premium over the cash of 26 points.

The contract remained at a relatively strong premium to the cash throughout the day on relatively healthy turnover, boosted by continued roll-over activity.

Yesterday's rise took some dealers by surprise as they had been betting on consolidation after the United States Federal Open Market Committee failed to come up with an interest rate cut at its policy meeting.

September futures, which are about to expire, rose 75 points to 9,625, a discount to the cash of about 25 points.

In all there were 14,062 contracts traded, taking the total for the day to 27,648 contracts, down on the 29,582 contracts on Wednesday.

In index options, trading in September focused on the 9,600 puts.

In October implied volatility at the money in calls was 21 per cent and in the puts it was 20 per cent. Activity focused on the 9,400 put and calls at the 9,800 and 10,200 strikes. Open interest has focused on the 9,200 put and calls in the 9,600 and 10,000 strikes.

Brokers were split on what yesterday's trading indicated.

Bulls said the strong overseas presence showed there was a definite change going on in sentiment towards Hong Kong blue chips as investment banks upgrade their Asia-Pacific and global weightings in index stocks. Morgan Stanley and Merrill Lynch are just two big banks to become more positive on the territory in the past month.

Bears argued the trading yesterday was a blip and, in fact, the upside on the market - if indeed there was any - would be capped by the relative poor fundamentals of the market. Bears expect continued consolidation and downside ahead with the trading range being maintained below 9,500 to the end of the year with 9,000 being tested regularly.

Credit Lyonnais Finance (Guernsey) issued 150 million 10-for-one call warrants in Bank of East Asia shares yesterday at 74.2 cents each with a strike price of $20.40.

The premium on the issue was 9.1 per cent and the gearing was 3.44 times.

Maturity is on November 27, 1996 with payment on the issue expected on October 24.