The Stock Exchange of Hong Kong is set to re-launch its warrant market next week and equity derivatives pros expect stiff competition as they look to issue warrants on the largest corporates. "It will be a war of attrition," according to Eddie Tam, director of equity derivatives at Credit Lyonnais in Hong Kong, who added, "historically, the warrant market in Hong Kong can feed five to seven houses. There will initially be 13 houses issuing." Tam expects the smaller firms who he said have been the most active in previous years, including Credit Lyonnais, Macquarie, Société Générale and KBC Financial Products, to win market share from the larger firms, such as Merrill Lynch." U.S. houses have waxed and waned on their commitment," according to Tam. James Rodríguez de Castro, managing director of global equity-linked products at Merrill Lynch in Hong Kong, declined to reply to Tam's remarks.
Albert Goh, v.p. of Asian equity derivatives and head of corporate marketing ex-Japan at J.P. Morgan, said "it is possible that for some players this may not work out," adding that smaller issuers may not get enough demand on their issues or may be unable to see the market flow and misprice warrants, declining comment on specific firms. Goh replied to Tam's comments about U.S. houses by saying: "just wait till next week." Adding that the firm has a major commitment to this market.
