Investors lose in April as covered warrants fall due to market decline

Investors suffered losses with all 19 covered warrant codes that expired in April, data on the Ho Chi Minh City Stock Exchange (HoSE) showed.

investors lose in april as covered warrants fall due to market decline hinh 0
The 19 covered warrant items were issued by SSI Securities (SSI), VPS Securities (VPS), HCM City Securities (HSC) and MB Securities (MBS) (Photo vietstock.vn)

The 19 covered warrant items were issued by SSI Securities (SSI), VPS Securities (VPS), HCM City Securities (HSC) and MB Securities (MBS).

The items were valid for six months until their expiration dates ranging from April 8 to April 22.

According to HoSE, exercise prices for those items were between VND20,300 (US$0.87) to VND133,000 – which were 8.97-12.5% lower from the breakeven of VND22,300-152,000.

The underlying stocks for the covered warrants were FPT Corporation (FPT), Military Bank (MBB), retailer Mobile World Investment (MWG), dairy producer Vinamilk (VNM), property developer Vincom Retail (VRE), VPBank (VPB), logistics and port firm Gemadept (GMD), HDBank (HDB), aviation firm Vietjet (VJC), and residential real estate firm Vinhomes (VHM).

Total trading volume of the covered warrant market in April was down 12.2% monthly to 134.35 million items and trading value dropped 28% monthly to VND45.1 billion.

Foreign investors net-sold VND1.74 billion worth of 4.7 million items in April.

The slumping stock market in February and March was blamed for the decline of covered warrants and as these items expired early in April, forcing investors to suffer as underlying assets had declined sharply.

FPT shares dropped as much as 20.6% during the period. Vinamilk shares lost as much as 31%, Vincom Retail shares plunged 44.7%, Vietjet shares plummeted 34.6%, and Vinhomes shares shed 37.6%.

A warrant allows the holder to buy or sell an underlying asset at a set price prior to or on a specific date if they choose. The underlying asset for a covered warrant can be a single stock, a basket of stocks, indices, commodities or currencies.

Covered warrants are highly profitable for holders if the underlying assets advance but the risk of losses is high if the assets decline. 

At the end of April, there were total 52 warrant codes issued by six securities companies. Only 10 of the total advanced from their initial prices.

VNS/VNA