China's first equity warrant expired last week and the event is seen as a step forward for the developing market.
Warrants on Baosteel, which were launched last summer, were the first official acknowledgement of equity derivatives in the Mainland (DW, 12/23).
The contracts have been on a bumpy ride as they neared maturity with daily moves downward as much as over 80% in price. "The fast drop of Baosteel warrant's trading price, in particular during the last several sessions, should provide investors with a better sense of the embedded risks in the warrant market," said Winston Wenyan Ma, author of Investing in China--New Opportunities in a Transforming Stock Market, based in New York.
Around two dozen warrant contracts are now listed on exchanges in Shanghai and Shenzhen. Ma continued that the overwhelming speculative nature and huge price swings of the warrants market won't dissipate any time soon as investors get to grips with the product.
Other recent equity developments in China include short selling (DW, 7/14) and company-issued stock options (DW, 8/18).
