Business

Thursday July 2, 2009

OSK launches call warrants on gold and crude oil

By YEOW POOI LING


PETALING JAYA: Malaysians can now participate indirectly in the trading of gold and crude oil with the launch of OSK Investment Bank’s call warrants, whose underlying exchange traded funds (ETFs) are designed to track the prices of those commodities.

OSK also simultaneously launched yesterday call warrants for oil company CNOOC Ltd (H-shares listed in Hong Kong) and Public Bank Bhd.

According to OSK head of derivatives and structured products Foo Keah Keat, the SPDR® GOLD TRUST (GLD) is an ETF listed in New York that reflects the price performance of gold bullion while the US oil fund, LP (USO), tracks the movements of West Texas Intermediate crude oil.

An ETF is a security that tracks an index, commodity or basket of assets but trades like a stock on the stock market with daily price fluctuations.

Call warrants, meanwhile, are issued by third parties like investment banks, which give investors the right to buy the underlying securities for an agreed price before maturity. In this case, the GLD and USO ETFs are the underlying securities.

Foo said both GLD and USO call warrants, which were cash settled, were the first to be issued in the country based on ETFs, following the Securities Commission’s new fund-raising framework introduced in May.

“We have to find ETFs that track certain commodities and Malaysians are more familiar with crude oil, palm oil and gold.

“We chose the GLD and USO ETFs because they are popular and more liquid than others. As an intermediary, our role is to provide instruments for investors to participate in,” Foo told StarBiz.

He said it was difficult to gauge the price movements of gold and oil since their volatility was subject to many factors that influenced supply and demand.

“Six months ago, when oil was hovering at US$45 per barrel, analysts expected it to fall to US$25 but that didn’t happen. There are investors that think prices have gone up but there will also be those that believe there is still upside potential,” Foo said, adding that gold was traditionally perceived as a safe haven, especially to counter inflationary prices.

As for the call warrants for CNOOC and Public Bank, the former’s business was in oil, hence it would benefit from the recovery in oil prices while there was limited call warrant on Public Bank, he said.

The offer for the four call warrants, with an issue size of up to 80 million each and maturity period of nine months, is open until 3.30pm today and will be listed on Bursa Malaysia on July 8.


OSK : [Stock Watch] [News]

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