(SINGAPORE) The stock market in 2009 may have regained much of the ground lost during the US sub-prime bear market of 2008, but the same cannot be said of the structured warrants market.

 

There, turnover last year sank to $10.9 billion, down by half from 2008 and by 61 per cent from 2007's all-time high of $28 billion.

 

Such has been the drop in interest that the once-promising segment's 2009 turnover is now back to what it was in 2005 when $10.6 billion was done.

 

The ratio of business in warrants versus the rest of the market, known as the warrants/market ratio, was 5 per cent in 2006 and 2007 but dropped to 3 per cent last year. As a result, average daily warrant business in 2009 was $43 million compared to $84 million in 2008.

 

Describing the slide in interest in warrants as 'alarming', Societe Generale's director of equity derivatives (ex-Japan) Edmond Lee, in presenting the 2009 summary yesterday, said the entry of new structured products such as contracts for differences (CFDs) could have contributed to the loss of interest in the once-popular segment.

 

'We are also looking to other Asian markets like Taiwan, which is showing great potential as well as Korea,' said Mr Lee. According to figures provided by Societe Generale, the warrants/market ratio in South Korea last year averaged 14.7 per cent, compared to 10.7 per cent in the region's leading warrant market, Hong Kong.

 

As at Dec 31, Korea had 3,421 stock warrants and 1,279 index warrants in issue, compared to Singapore's 219 and 92 respectively.

 

'At the moment Taiwan has a few restrictions on warrants, one being that investors can only sell the day after buying,' said Mr Lee. 'But the authorities are working on changing the rules, so we expect the market there to take off thereafter.'

 

The most popular warrant traded here last year were those on Hong Kong's Hang Seng Index, which accounted for a total of $5.6 billion or 51 per cent of the whole market's business. Second most active were those on the Straits Times Index that accounted for $2.7 billion or 25 per cent.