With persistent low investment returns for domestic equities, bonds and deposit accounts, foreign securities firms are offering an investment opportunity in US equities through derivative warrants (DWs) linked to the S&P 500 index in order to reap a better return.
JP Morgan Thailand has issued DWs linked to the S&P 500 index, one of the major benchmarks of the US stock market. The new warrants, which began trading on Sept 28 on the Stock Exchange of Thailand (SET), offer investors broader investment opportunities to gain exposure to the US equities market amid low return from domestic equities.
"Volatility has risen significantly since the beginning of the year, and investors are always looking for opportunities to diversify their portfolios," said Chayotid Kridakon, senior country officer of JP Morgan Thailand. "The debut of the S&P 500 warrants, which are linked to the movements of E-mini S&P 500 Futures, provide local investors another alternative to gain exposure to the volatility in the world's largest stock market."
JP Morgan's S&P 500 warrants mark the first investment instrument that offers exposure to the US market available to local retail investors during the full trading hours of the Thailand market.
They are the second foreign DWs offered by the global financial services firm in the country, following the launch of Hang Seng warrants in March.
Macquarie Securities Thailand also has its own DWs linked to the S&P 500 index.
The broad US stock index tracks the largest 500 companies listed on the New York Stock Exchange, the Nasdaq Composite and the Chicago Board Options Exchange, including Apple, Microsoft, Amazon, Facebook, Alphabet, Berkshire Hathaway and Johnson & Johnson.
These stocks will offer Thai investors a chance to invest in offshore stocks through DWs with a small amount of money, said Noppadon Duangthipnest, head of derivative products at Thailand Macquarie Securities.
Mr Noppadon said the S&P 500 DWs are expected to be well received by Thai investors after the Hang Seng index warrants, the first foreign index DWs, quickly gained the second spot as the most-traded underlying DW within a year of their launch.
SET president Pakorn Peetathawatchai said S&P 500 DWs mark a major product development, serving as an alternative for Thai investors seeking US exposure.
The SET expects more DWs on other foreign indices to be issued in the near future.
DWs listed on the SET have average trading value of 6.4 billion baht per day, or around 10% of total market trading valuation.