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SCMP Reporter

Investment banks launched a trio of covered call warrants on Hong Kong blue chips together with a put warrant on China Light and Power yesterday.

   Barclays de Zoete Wedd (BZW) launched calls on New World Development, Bankers Trust on Sun Hung Kai Properties and Union Bank of Switzerland (UBS) on Hang Seng Bank.

  The put warrant, one of only a few in the market, was launched by Paribas Capital Markets.

  Brokers said they were puzzled by the warrants' timing, given the uncertainties facing equity markets globally.

  Unlike January, when the market had been hit with a stream of covered call warrants, most equity players said yesterday's issues were not a bullish sign.

  Several investment bankers outside of the deals said there was little interest in covered warrants at the moment.

  One derivatives source at a regional investment bank said the demand had to be from the retail side, 'but I'm not sure why it's there'.

  Miles Remington, of Crosby Securities, said: 'We are seeing some existing warrants trading at ridiculously low premiums, which is an indication that there are too many warrants out there already.'   Sources at issuing banks countered that argument, saying there were bargain hunters looking for leveraged exposure to selected local shares.

  Anthony Wah, of BZW, said that yesterday's warrants were not particularly ambitious, coming in smaller packages than the massive issues seen earlier this year.

  The BZW offering was only 70 million call warrants, 10 of which can be converted into one share of New World. The other two issues were smaller.

  Only the put warrants on China Light found more demand. Paribas placed 87 million of the derivatives, which give investors the right to sell one share of China Light for every 10 warrants held.

  One trader said even more warrants might have seen the light of day yesterday but a few banks had withdrawn issues.

   Warren Kwan, a trader with UBS, said: 'We wanted to issue on Tuesday, but the market was too intimidating. Today, the market stabilised.'   On Tuesday, the market opened sharply lower on worries higher interest rates would dampen prospects for equities.



Warrant wave poses timing riddle