Macquarie Securities Thailand is betting on lucrative investment returns from Chinese technology stocks this year, with a roll-out of derivative warrants on the Hang Seng Tech Index (HSTECH DWs).
Those high-return Chinese tech stocks are sparking asset managers to increase their funds' proportions of Chinese equities, said fund managers.
A DW is a financial instrument that requires only a small amount of investment but offers strong potential for high returns.
There are various underlying assets for DWs traded on the Stock Exchange of Thailand (SET) such as the SET Index, foreign stock market indices and single-stock DWs, which are linked to the SET50 and SET100, said Noppadon Duangthipnest, head of derivative products at Macquarie Commodities and Global Markets.
DWs have become active trading on the SET, representing around 10% of total market trading value, or around 10 billion baht per day.
That volume is likely to increase in the future, said the source.
He said HSI year-to-date returns as of Feb 23 were 12.5%, while HSTECH recorded returns of 17.1%.
Since its inception on July 27, 2020, HSTECH recorded returns of 45.6%, while the SET Index's year-to-date returns were only 3-4%.
HSTECH is Hong Kong's new flagship index that tracks the 31 largest technology companies listed on the Hong Kong Exchange.
Stocks calculated in the index include Alibaba, Tencent, Meituan and Xiaomi, with a combined weight of more than 30%.
They contribute an average of 18% to the Hang Seng Index's (HSI) daily turnover.
The DWs began trading on the SET on Feb 24, said Mr Noppadon.
"Investors should take this opportunity to invest in Chinese technology stocks this year. They can start investing in DWs with a small amount of money, unlike other types of investments such as foreign investment funds or direct investment through securities firms," he said.
"Developing products linked to the global market is the SET's priority to equip investors with financial instruments that allow them to more efficiently diversify their overseas portfolio," said Pakorn Peetathawatchai, president of the SET.
"The issuance of HSTECH DWs by Macquarie will offer Thai investors a broader range of investment alternatives and access to the largest technology companies listed on the Hong Kong Stock Exchange."
A source from the securities industry who requested anonymity said DWs are very popular in Asian stock markets, especially Hong Kong and Taiwan, where the products' turnover is around 30-50% of the total market trading value. This is because they require a small amount of investment and perform in both market uptrends and downtrends.
The source said there are 12-14 DW issuers on the SET with roughly 1,000 DWs issued and a relatively short investment period of 2-4 months.
The average price per unit is only 0.1-2.00 baht, making them popular with retail investors.
The top five DW issuers in the Thai market are Bualuang Securities, Phatra Securities, Macquarie Securities Thailand, KGI Securities Thailand and Yuanta Securities, the source said.
The most active DWs on the SET are SET50 index DWs, which contribute 50% of total DW trading volume, followed by single-stock DWs at 40% and foreign indices DWs at 10%.