In first, Cathay Securities to issue warrants of H-shares
By Ted Chen, The China PostTAIPEI, Taiwan -- Cathay Securities Corp. (國泰證卷) yesterday announced plans to issue warrants for H-shares of China Railway Group Ltd. (中國中鐵) on March 1, an unprecedented first in cross-strait finance.
February 27, 2013, 12:08 am TWN
Despite the turmoil in the markets caused by the ruling party's plan to levy a capital gains tax, warrant trading is on the rise, reaching 2 percent of market volume last year, said Cathay Securities.
According to Cathay Securities, the recent rise in trading signifies the growing acceptance of warrant investments among the general public in Taiwan.
The added availability of New Taiwan dollar-denominated investment in H-shares through warrants will help Taiwan in gaining greater access to financial markets of the Greater China region, in addition to providing opportunities for Taiwanese investors to harness developments in Chinese indices, according to Cathay Securities.
The warrants will be listed as Cathay AB (國泰AB), with entitlement ratio at 0.3, and priced at NT$0.8 per warrant and sold in units of 1,000. The warrants' strike, or exercise price, is set at HK$5.25, with a duration of six months.
A low cost investment of NT$800 for 1,000 units of the Cathay AB warrants will give investors the option of capitalizing on gains of Chinese shares, said Cathay Securities.
A warrant is a security that entitles the bearer to purchase the underlying at a fixed exercise or strike price within a set duration. Warrants differ from call options in that they are issued by private parties, are not standardized as exchange-listed options, and are dilutive when exercised, meaning new shares are issued to fulfill the terms of the warrant.