First derivative warrant debuts

Stock analysts recommended speculative trading of the derivative warrant as the PTT stock price had fallen amid lower global oil prices.

A derivative warrant (DW) is a type of investment very similar to a normal warrant. It can be traded on the Stock Exchange of Thailand and the trading fee is similar to stock trades.

But unlike normal warrants, the issuer of the DW is not PTT itself but a third party such as a broker - KGI Securities (Thailand) in this case - so the credit risk is different from warrants issued by PTT.

The DW was traded at Bt6 per unit during initial trading in the morning session, lower than the IPO price, before rising to its peak of the day at Bt7.20.

However, the DW fell afterward but still stood above the IPO price, as the PTT share price rose 2.25 per cent to close at Bt227.

Naruemol Artamnuayvipas, executive vice president of the Equity Derivative Department at KGI Securities (Thailand), said the lowerthanIPO price of DWs at one point in the trading yesterday was due to falling world crude oil prices, which dropped US$2.79 (Bt94.86) per barrel.

However, when the DW price falls it would be a good opportunity for investors to buy cheap PTT13CA, as crude oil prices, which affect the DW price, are expected to recover in the long term.

An analyst from KT Seamico Securities, however, recommended a waitandsee policy, as PTT13CA is a new product, while the market is quite volatile.

Another analyst, from Philip Securities (Thailand), said DW prices were difficult to predict.

Moreover, if investors hold the DWs until maturity, the upside gain is expected to be less than investing in PTT shares. Thus he recommended only speculative trading.

Meanwhile, unlike holders of normal warrants, those with sixmonth PTT13Cas will not be offered any new shares, so there is no dilution effect for PTT's stock. Holders can trader their DWs with no ceiling and floor until maturity.

At maturity, holders can exercise their DWs for cash, not for equity, in a cash settlement.

KGI Securities (Thailand) is also the PTT13CA's marketmaker and has appointed Thanachart Securities as the selling agent.

KGI has offered 20 million DWs to the public with the exercise ratio set at five DWs per PTT share, even though there is no real share conversion.