New structured product – callable bull certificate
Filed Under (Bursa News) by Webmaster on 16-07-2010
Tagged Under : callable bull certificate, CIMB
CIMB Bank will be listing the first callable bull certificates on Bursa Malaysia today, making it the first issuer in the country to have such instruments traded on the local bourse.
This follows the issuance of callable bull/bear certificates’ (CBBCs) listing requirements by Bursa on May 31.
CIMB yesterday launched four callable bull certificates that would commence trading today. They are on AirAsia Bhd (AirAsia CBLC), Gamuda Bhd (Gamuda CBLC), Genting Bhd (Genting CBLC) and Berjaya Corp Bhd (BJCORP CBLC).
From left: CIMB Investment Bank head, equity derivatives group Lim Jong Hau, Datuk Yusli Mohamed Yusoff and Datuk Charon Wardini Mokhzani at the launch.
The call price of AirAsia CBLC is RM1.05 while that of Gamuda, Genting and Berjaya are RM2.70, RM6.15 and RM1.06 respectively.
CBBC are hybrids of call warrants and share-margin financing.
Explaining the mechanism of CBBCs, CIMB Group deputy CEO, corporate and investment banking Datuk Charon Wardini Mokhzani said the instruments closely track the performance of a share or any other underlying instrument without requiring the investor to pay the full price of that underlying instrument.
“If the price of the underlying instrument changes by 10 sen, the price of CBBCs ought to change by a similar amount, after adjusting for the exercise ratio. Investors can therefore easily track the performance of a CBBC by looking at the price movements of the underlying instrument.
“Its key feature is the mandatory call event. If the price of the underlying instrument reaches a predetermined level known as the call price, the issuer will call the CBBCs. It will thus expire early and its trading will be suspended. Investors will receive any positive difference between the settlement price and exercise price,” he said at the launching of the callable bull certificates.
He added Malaysia was the first country in South-East Asia to introduce CBBCs which was designed to give investors more choice.
Securitised derivatives, he said which include call warrants, put warrants and CBBCs have simply blossomed as last year alone, the Deutsche Borse had listed 430,000 securitised derivatives and the NYSE Euronext (Europe) 11,722.
According to Charon, if successful, CIMB has plans to offer more CBBCs for other counters.
CIMB Investment Bank Bhd, head, equity derivatives group Lim Jong Hau said there were plans to add four new CBBCs or call/ put warrants per month.
Bursa chief executive officer Datuk Yusli Mohamed Yusoff said the new investment vehicle provided fresh options in the equities market and adding greater depth in the structured warrants segment.
This development pointed to a greater maturity of the local equities market and also towards the expansion and diversity of the structured products segment, he noted.
