Firm demand for CapitaLand issues as stock price fluctuates

THE recent market plunge has not dampened investor enthusiasm for covered warrants on property giant CapitaLand.

They have been snapping up growing numbers of the contracts on the counter, as the mother share price gyrated by as much as 20 per cent over the past week.

And there are plenty of warrant contracts - with different strike prices and maturity periods - for them to choose from.

'CapitaLand has enjoyed a good run-up, and this has encouraged traders to continue to take an exposure on the stock via the covered warrants,' said Mr Ooi Lid Seng, Societe Generale's (SG's) vice-president for structured products for Asia ex-Japan.

What traders like about CapitaLand is its large exposure to the red-hot China property market and its choice land bank in Singapore.

CapitaLand also controls some of the hottest real estate investment trusts (Reits) listed on the Singapore Exchange.

A Merrill Lynch report on Tuesday picked CapitaMall Trust, CapitaCommercial Trust, CapitaRetail China and Ascott Residence Trust as its key stock picks for this year.

An added attraction is the volatility of CapitaLand's share price, which magnifies any gain that a covered warrant may enjoy.

Buying a call warrant gives the holder an option to buy into a stock or a stock-market index over a period of three to nine months at a pre-set price - so generally their holders would like to see a rally.

Put warrants, however, give its holders the option to sell a stock or a stock-market index at a pre-set, or 'strike' price over a period.

Mr Ooi said that the most popular call warrants on CapitaLand issued by SG have strike prices of $6.50, $6.85 and $7.35. One popular put warrant comes with a strike price of $7. 'All these strike prices are close to CapitaLand's current market price,' he added.

'In a volatile market, people can take a position on where CapitaLand is headed. If they are bullish, they can buy the call warrant. And they can hedge their risks by buying into the put warrants.'

CapitaLand shares fell five cents to $6.85 yesterday.

GOH ENG YEOW

engyeow@sph.com.sg