Citibank has joined the ranks of covered call warrant issuers in Hong Kong, tapping the market with a maiden launch of 142 million warrants on First Pacific.
The US bank teamed up with Crosby Investment Securities for the issue, a partnership matching Citibank's derivatives expertise with Crosby's research and sales strength.
Even with the Hang Seng Index moving sideways, new warrant issues continue to find their way into the market. Goldman Sachs this week placed a small offering on Swire Pacific and BZW recently sold warrants on Hongkong Telecom.
'Goodness knows how they sell them,' one market player said - but the business is lucrative, especially when the market is rising.
Citibank head of sales, Equity Derivatives Asia, Jonathan Wauton said: 'The question was how could we add value with covered warrants in Hong Kong, so we decided to team up with Crosby. We've got the derivatives, but no research. They have the research, but no derivatives.' Crosby's bullish outlook on First Pacific prompted the choice for the team's premier issue. The stock has only one warrant outstanding on it, unlike some of the blue chips.
The new warrants carry gearing of 3.1 times and were issued at a premium of 12.1 per cent at a price of 38.47 cents a piece. Ten warrants allow the holder to buy one share of First Pacific at a price of $9.60, compared with a price of $12 at the time of the issue.
