Liew KL aka lklatmy

First Put Warrant in Malaysia to be launched this Friday,7th August 2009

2009-08-03T22:42:00.000-07:00

The first ever put warrant will be listed on this Friday in Bursa.It is based on a Hong Kong stocks with very high volatility and a Call warrant will also be issued at the same time.

Some details:

-European style,cash settled,

-Issuer is AmInvestment Bank Bhd,

-Underlying confidential but my guess is HKEX,

-Issue size 36 million warrants

-Issue price around 20 sen

-Tenure 18 months,expiring February 2011

-Exercise price at the money,

-Exercise ratio 125 put warrant to one share,

-Premium 32% to 42% ,

-Gearing 2.1 to 3.2x

Listing date is 7th August 2009.

This is the first ever put warrant to be listed on he Bursa and it is also issued together with a call warrant.Those who have high risk apetite may wish to consider this new instrument.If you think the price of the underlying is bullish,you can buy the call warrant,and if you think the underlying share price is bearish,then you can buy the put warrant.

I am sharing the little that I know and I bear no responsibility as to the accuracy ,neither am I responsible for whatever decision you made pertaining to these instruments.

....................................................................................................................................

The following additional information is added on 06/08/09 after the Term sheet is published:

-Underlying is shares of Hongkong Exchanges and Clearing Ltd listed in HKEX,

-stock code HKEX-CC for the call warrant,HKEX-H1 for the put warrant,

-issue price is RM0.185 and RM0.20 for the call and put respectively,

-exercise price HKD 143.90,

-listing 7 th August 2009.

The rest of the facts listed above remained unchanged.

BRK.b ZSCW-updates

2009-04-17T01:40:00.000-07:00

Subscription closed and all the 100 million units have been taken up.

This BRK.b ZSCW is of 5 years and will expire on 16/4/2014.

Listing will be on 22/4/09.

Exercise Ratio is 11,148.29 to 1,

BRK.b closing price at price determination date USD3,072 per unit *

FX rate at price determination date 1 USD =3.6290 *

(The price of this ZSCW when listed will be determined by the two variables marked *)

Details of Berkshire zero strike call warrant

2009-03-12T17:56:00.000-07:00

Here are more details of the Berkshire zero strike call warrant(Bzscw).

Issuer......................................AmInvestment bank Bhd

Issue size................................100 million call warrant

Underlying..............................Berkshire B share quoted on NYSE

Exercise ratio..........................To be determined on the Price determination date

Exercise price.........................Zero

Issue price..............................RM1 per cw

Settlement.............................Cash settlement

Expiry date.............................5 years

Closing date for subscription..10 April 2009

This Bzscw is of European style and issue by way of private placement to selected investors only.

If anyone is interested ,please e-mail me at lklatmy at yahoo dot com .(you would be required to open a trading account with the firm AmInvestment Bank Bhd and I will assists you on this).All questions can be posted in the Low Yat .net forum.http://forum.lowyat.net/topic/935683/+2060 or in this posting.

(Trading in call warrants carry unlimited gain as well as total capital loss possibilities. I give no guarantee on the profitability or tradeability of this Bzscw)

Zero strike call warrant on Berkshire Hathaway

2009-03-10T06:20:00.000-07:00

Zero strike call warrant is not new in Malaysia,there are already a few listed in Bursa.The trading of these ZSCW is very thin probably due to the high value.

The main difference between a Call warrant and Zero strike call warrant(ZSCW)is that unlike call warrants ,there is no leverage in ZSCW.

When you buy a ZSCW,you are effectively buying the underlying but without dividends that may be declared.As the exercise ratio is normally one to one,the price movement of the ZSCW should mirror that of the underlying.

The risk of trading in ZSCW is by no means any lesser than trading in any call warrant.If the price of the underlying keep coming down,so does the price of the ZSCW.However,since the ZSCW is normally written on a blue chip underlying,chances of the value of the ZSCW approching zero is quite remote but is not impossible .

A new ZSCW base on Berkshire Hathaway will be issued in the next few days by a local warrant issuer.I will post more details when the termsheet is out.

What is " buying in"?

2008-11-05T19:14:00.000-08:00

Some of you may have gone through the experience of overselling your stocks,resulting in non fulfillment of your obligation to deliver the stocks sold on due date ，what happens then?

Under the Bursa Fixed delivery and settlement rules,all sellers are supposed to have sufficient free stock balance on T+2 in their CDS account to meet their selling obligations.If there is insufficient stocks to meet the obligation,Bursa Depositories Sdn Bhd(the agency in Bursa responsible for maintaining all CDS accounts and the shares therein)will inform the PO(paticipating organisations) and a process of "buying in"will be instituted against the defaulting seller.

The process of "buying in"takes place at 8.30am on T+3,the buying in price will be 10 bids above the previous day's closing price,if the stock closed at RM0.255,the buying price will be RM 0.305,if the stock closed at RM10.30,then the buying in price will be RM11.30.

The "buying in"process is further categorised into "auto"and "manual".The example above where the buying in occurs on T+3 is "auto".

If you found out that you have oversold on the same day( T+0) but is unable to cover back for whatever reason,(typically market has closed ),you can request through your Remisier , submit a request to do a "buying in"for you on T+2 instead of T+3.Bursa will then do the "buying in" at 8.30am ,day T+2 and the price will be T+1 closing price add ten bids;this is the "manual buying in "process.

The reason some people choose the manual process is that they do not wish to be exposed to the price fluctuation uncertainty for another day.

The resulting financial losses can be substantial if the oversold quantity is large.If the oversold is due to client's own fault(eg,gave instruction to sell 5000 units but only have 4000 units in the CDS account) ,then it is his responsibility;howere,if the oversold is not your fault(eg Remisier keyed in wrong quantity),then the client can refuse to accept responsibility for it.

The existing system used by all brokers DO NOT check for the availability of shares before a selling order is executed.Bursa also do not allow third parties including Remisiers to access client's CDS account except with client's written authorisation.It is also highly impossible to expect the Remisier to memorised all his client's portfolio.For your own protection,it will be good practice for you to double check before giving any selling instructions.

Who sells to the "buying in"then?

Every morning before 8.30 am,there will be many hardworking Remisiers and Dealers who comes in early and screen through the "buying in"list posted by Bursa on the computer.If the counter listed is lucrative and in quantities large enough to warrant profits,the Remisier will try to find from his own clients,those having the particular counter and try to sell it to the "buying in" .All matchings will be on "first come first serve"basis and it is not easy to get matched.Nevertheless,it is possible at times and the succeful one will be rewarded with the difference of the "buying in"price and the cover back price when the market opens.

Here's a trick to get your Remisier to try selling to "buying in"for your account,either give him all your business and be an important client to him,or a very effective means is to tell him that you would not mind to share the resulting profits .

Some Bursa privilege accorded to selective players only

2008-09-29T18:52:00.000-07:00

Last week,Bursa Malaysia Bhd issued a letter to all Participating Organisations(PO) reminding them that no short selling is allowed ,except:

Regulated short selling as permitted under the rules(see my posting of 26May08 on this title);and

Permitted short selling ,this can only be done for the PO's proprietary account only,(The short selling done in accordance to this Rule must be bought back on the same trading day to square off the positions)

In order to provide a level playing field,it is imperative that the exchange must ensure all players are accorded the same privileges.If only POs can trade for their proprietary account and enjoy short selling(albeit for the day only),other players are disadvantaged to the extent that they can't take advantage of a bearish market sentiment,sell first and buy back later in the day.

The authorities including Bursa,Securities Commission and Ministry of Finance should look into this issue and provide a level playing field for all.If POs are allowed to do it,others must also be permitted.

(PO means brokers,investment banks,proprietary account means own trading account)

Single Tier Tax and it's effect on Dividends received

2008-09-08T06:17:00.000-07:00

In this posting,I will try to explain in simple layman terms,what is Single Tier Tax (STT)system and it's effects on you,a shareholder who receives dividend from public listed companies.

In last year's budget,the Government introduced the STT and the new system came into force with effect from year of assessment 2008,This new STT effectively removed the tax credit that is attached to dividend payment made by all companies incorporated under the Companies Act 1965.

Prior to the introduction of the STT,Malaysia had been using the Imputation system.The Imputation system works as follows (Note:all illustrations and calculations have been simplified for ease of understanding.The actual tax computation may differs greatly from my example shown here):

The Imputation system

When a Company makes profit of RM10 million in a financial year,tax at 27% would cost the company RM2.7m which has to be paid over to Inland Revenue in cash.This 2.7 m paid is known as Section 108 credits.

If this company decides to distribute a gross dividend of 10% less tax to the shareholders, shareholder who holds 1000 shares of RM1 each would receive RM100 less tax 27%,the net amount received is RM73.

This shareholder then declares the gross dividend of RM100 in his Income Tax return as his dividend income.The RM27(known as S108 credit) is then deducted from the tax payable by the shareholder .This whole system where tax paid by the company is imputed to their shareholders is known as the "imputation system".

This system is beneficial to individual shareholders whose top income tax bracket is less than the statutory rate applicable to companies(in this case,the 27 %),for example,a shareholder whose maximum tax rate is say 13 %,will be able to claim back the 14 % difference in the process.For those with no income tax payable such as newly employed whose pay is low and retirees with no taxable income,they can claim back all the S108 credit and the Income Tax department will send a cheque upon receiving and determining that there is no income tax payable.

The STT system

Under the new STT introduced this year,dividends received under the STT system will not be imputed with any S108 credits .Shareholders who receive this type of dividend is not taxable for the dividend income.In the same example above,the shareholder still receives RM73 but the RM27 paid by the company to the Income Tax department cannot be claimed as a credit against his tax payable.So the same retiree above will actually lose RM27 under the STT system.

In the STT introduced this year, a company with S108 credit unutilised can opt,either to switch over to the SST or continue to remain in the imputation system for another six years provided there is still credit balance in their S108 account with the Income Tax department.

When you received your next dividend cheque,check whether it is with S108 credit or STT.categorise them accordingly and it will make your next income tax filing easier.

Difference between Direct CDS and Nominees CDS Account

2008-08-20T19:19:00.000-07:00

Ever wonder whether your CDS account is Direct or Nominee?

When you open a trading account directly with a Participating Organisation(Broker or Investment Banks,in short,PO and IB) or through a commercial bank,you will also be required to open a CDS account at the same time.

By opening a CDS account,you are creating an account with Bursa Depositories Sdn Bhd through the PO. Bursa Depositories Sdn Bhd is a subsidiary of Bursa Malaysia Bhd which does all the share debiting and crediting in respect of shares listed in Malaysia.

To illustrate,when you buy 100 units of Public bank from the open market,on T+2,Bursa Depositories Sdn Bhd will do the debiting of the 100 units of Public Bank shares from the seller's CDS and credit it to your CDS account.Henceforth,there will be 100 units PBB shares in your CDS account until it is debited from your CDS account for whatever reasons.

If there is any corporate exercise such as bonus issue,share split etc,the crediting of the new shares arising from the exercise is also done by Bursa Depositories Sdn Bhd in collaboration with the company's share registrar.

A monthly statement will be posted to all depositors who did transactions during the month.If there is no transaction,then a half yearly statement will be sent to you.

When a trading account is opened with a PO,the CDS account that is opened at the same time consists of two types,either a Direct CDS or a Nominee CDS.A Direct CDS is under your own name and address,whereas a Nominee CDS is under the PO's name and address with specific description that you are the beneficial owner(eg. HLG Nominees (Tempatan)Sdn Bhd for account Lee Ah Kaw).The exact description of the name and address will be used in the Share Registrar's record of share holders.

Now you understand why so many investors complained that they are not receiving annual reports,dividends ,rights issue form etc from the investee companies.It is because the CDS account opened is a Nominee CDS account and all letters are sent to the PO's office.PO charged a service fee for handling the rights issue,dividend etc.

Why then some PO want their clients to open Nominee CDS?

The simple answer is for collateral purpose.Shares in Direct CDS account is under your direct control and you can request to transfer out the shares to another CDS account of your name, or to your family members' CDS account with proper documentary evidence,without any hindrance.But if you ever wish to transfer out the shares in the Nominees CDS account,the consent of the PO is required although it's your shares.

Typically,most online broking that offers cheap brokerage requires your share to be kept under Nominee CDS account.

There are four distinct disadvantages of using a Nominee CDS:

you can't use a Nominee CDS to apply for IPO(initial public offers);
if you wished to attend the AGM of the investee company,you must get the PO to appoint you as a proxy;
if you wished to transfer out shares from your Nominee CDS to your relative's CDS ,you must first transfer the share from Nominee CDS to your Direct CDS ,then proceed to transfer the share to your relative's CDS .Whereas for shares in Direct CDS,there is only one step where you transfer direct from your CDS to your relative's CDS;.This apply to transfers that entail change of beneficial ownership.(edited on 27/02/09 to correct an earlier fundamental error.)
POs charge you a service fee for all dividends received and paper works done such as accepting rights issue or other corporate exercise that involve filling up of forms.

If you have a choice,opt for Direct CDS since Nominee CDS is of no benefit to you at all.

So many counters oversold on 10th July 2008?

2008-07-15T01:37:00.000-07:00

On 15th July 2008,I came across some happening in Bursa which I have never seen in my fourteen years as a Remisier.There were so many counters oversold on 10th July that yesterday morning,the buying in was in such hugh quantity, almost everyone who came in early got a share of the cake.Everyone was happy and were laughing to the bank.

There were so many choices,I couldn't believe it,so do the many Remisiers who came in early.Some of the counters oversold arePBB709,500units,MRCB182,500units,Zelan113,300units,Sarawak100,500units, Boustead126,500units,Airport221,200units,Hapseng125,200units,Misc712,600units and so on.This has not happened before.

Obviously,someone or a group of person shorted the market heavily on the 10th July and couldn't cover back the selling on the same day.

The question is who sold in such a big way that day without first owning the shares?

Let's see whether there will be any announcement from Bursa on this.It will be interesting to see the aftermath and maybe,someone may be charged for short selling later.

Today,16th July 2008,there are still many buying in but the number of counters and quantity are much lesser.Things should be back to normal from now.

For those who may not know,buying in is a process conducted by Bursa against those clients who sold earlier and have no shares in their CDS account to meet the delivery obligation on T+2.The buying price is ten bids above the preceeding day's closing price.Buying in is at 8.30am on T+3.

The losses can be heavy if the quantity oversold is significant.I believe the losses for this particular buying in process runs into millions.

YTL Power Warrant A vs YTL Power Warrant B

2008-06-24T18:17:00.000-07:00

YTL Power is a defensive stock with reasonably good fundamentals and dividend yield.It is also a stock that actively carry out shares buy back and had been distributing the treasury shares back to their shareholders.This counter ,I believe,is in the portfolio of a lot of investors.

The company currently has two warrants,Warrant A and Warrant B. I will try to share here the terms of the two warrants and which one is better value for money.

Warrant A was issued a few years back .It's size is 867,670,744 units,with exercise price of RM1.39 and exercise ratio of 1 to 1.It is due for expiry on 08/01/2009.

Warrant B was issued recently with size of 1,776,371,304 units,exercise price is RM1.25,exercise ratio is also 1 to 1,expiry date is 18/06/2018.

Both warrants are American style,meaning it can be exercised anytime .

Based on the current YTL Power market price of RM1.97,the intrinsic value of Warrant A is 0.58 and Warrant B 0.72.But their respective current market price is RM0.725 and RM0.645.

There is also time value attached to the two warrants ,with another 9.7 years to expiry compare to 7 months,Warrant B is definitely "better value for money"compare to Warrant A.

What is regulated short selling(RSS)

2008-05-26T19:05:00.000-07:00

There have been many inquiries appearing in various online forum on this topic.But answers are few and often inaccurate.As it is onerous to comply with the various requirements, RSS has not picked up momentum or may not been done at all.It is nevertheless worth to know the nitty- gritty of it.

Many investors are keen to sell short at a time market is bearish,In Bursa,you can actually sell a stock,then cover back WITHIN THE SAME DAY,and the price difference will be your gain/loss.Legally,you are NOT allowed to do so as you are technically committing short selling.In most instances,you will be able to get away with it,but,I have seen many cases where the Remisier/Client is called up for interview by Bursa or the Securities Commission.So my advice is don't do it.

You can instead shortsell the FKLI or Single Stock Futures in the futures market which is also operated by Bursa.But that's a different issue and I may cover this later in another posting.

In Malaysia,short selling is not allowed.But RSS is.I will attempt to explain the two in my own language and not so much from the legal side of it

Short selling means you sell a share without first having a beneficial interest in the captioned shares.

RSS means you sell a share without first having a beneficial interest in the captioned shares,but you have prearranged to borrow it from the Central lending agency(CLA).

In order to do RSS,an investor,must first open a Designated RSS trading and RSS CDS a/c with an approved Participating Organisation(PO) ie investment bank(not all POs are approved).

A CLA is an agency set up by Bursa where all lending and borrowing is done.An investor don't deal direct with the CLA,but go through the approved PO.

If you have excess shares,you can lend it to the CLA and earn some fees,If you wish to do RSS,you must first borrow from the CLA and you need to pay a fee plus placing sufficient collaterals.All these are done through the approved PO.

The type of stocks eligible for SBL(securities borrowing and lending)is similar to the approved securities for RSS,a complete list can be viewed from the Bursa website.

The selection of approved securities is based on the following criteria:

1.Average daily market capitalization more than RM500m for the past 3 months,

2.At least 50m shares in public float,

3.Average monthly volume traded more than 1 million units for the past 12 calendar months.

Upon successfully borrowed the required stock,you may then ask your dealer to do RSS for your account.The RSS order can only be keyed in at a price higher than the last traded price.

At the moment,the lending pool is very small and I believe only Bursa shares is available,but the quantity is quite small,may be less than 100,000 units.

In the event the lender or CLA recalls the shares,the borrower is obliged to return it.In the present situation,since the lending pool is very small and shallow,it will be suicidal to borrow and do RSS.

All dividends and rights shall continue to accrue to the lender.The borrower will have to return whatever dividend or distribution received.

As you can see,it is not so easy to do RSS,as far as I know,no one has done it in the Bursa yet.

Welcome to my blog

2008-05-12T20:52:00.000-07:00

Finally,I took a great step forward and started a blog of my own.To many of you ,this may not be a big deal,but not for me!!! Haha.

Me,a father of four and my eldest going to enter university soon.Now you understand why I said it's a great step for me.Most of my topics will be on Malaysian stock and futures market which is relevant to my job.

Those of you who came here from the link in my signature in Lowyat.net and Cari.com may already know that I am a CMSRL(meaning Remisier in Malaysian context).Unknown to many,I am also licensed to trade in Futures (Futures Broker's Representitive)and also an Accountant by profession which I don't practise since years ago,haha.

All views here are not meant to be advice given but purely for discussion or sharing only.So please do not trade based on opinions and views expressed here.

Really not much substance in this first posting .Apologies..