KUALA LUMPUR: Investor interests in Malaysian warrants are expected to continue its upward trajectory in the second half of the year, as warrant players move from the stabilising China market to the local equity market.

“In terms of growth, Malaysia outperforms other warrant markets in the region. It is definitely growing faster than any other warrant markets.

“We see great opportunity here — probably more than any other Southeast Asian markets,” said Macquarie Group Ltd head of derivatives Barnaby Matthews at the launch of Macquarie Group’s and mobile trading app Tradehero’s Warrant Hero Trading Contest yesterday.

“I see more [warrant investors being attracted] to the Malaysian market,” he added.

Matthews said investors are turning their focus back to Malaysian stocks and indices now that the economic situation in China has stabilised.

Foreign investors have been avoiding China due to severe government intervention aimed at curbing excessive speculation in Chinese stock markets, resulting in massive capital outflows from China over the past four quarters.

“Now that the situation in China has begun to stabilise, investors are turning their focus back to Malaysia on Malaysian stocks and Malaysian indices,” he said.

“Warrant markets tend to be active where the broader stock market see greater activity. Volatility can bring opportunities but also uncertainty — some volatility is good but too much is bad [as it signifies excessive risk],” Matthews added.

Matthews is optimistic that Malaysian warrants will continue to see a pickup in interest going forward, predicting a 20% to 50% growth in volume traded over the next two to three years.

“We are optimistic about the second half of the year. It is a volatile time due to uncertainty over how the US Federal Reserve is going to manage the interest rate hike and it also depends on what happens elsewhere in the world, but overall, I am quite optimistic,” he said.

Demand for structured warrants have been gaining traction in Malaysia.

Earlier in his speech during the launch, Bursa Malaysia Bhd chief executive officer Datuk Tajuddin Atan said turnover for structured warrants reached an impressive RM4 billion in the first six months of the year.

“In the last month alone (July), an impressive RM1.63 billion was traded up to July 20,” he said.

The Macquarie Group is currently the largest issuer in Malaysia by volume trading. It launched its first tranche of structured warrants in October last year.

“Since the launch, we have clinched a 60% market share for warrants [based on volume traded]. It is a competitive market and we will work hard to stay in first place,” said Matthews, adding that it hopes to see an increase in trading activity in warrants with the Warrant Hero contest.

The Warrant Hero contest will run for 12 weeks, from Aug 3 to Oct 23, 2015.

“The aim of the contest is to improve investors’ understanding and awareness of structured warrants in Malaysia. Macquarie sees education as the key to continued market growth and the Warrant Hero contest is the latest initiative in our drive to develop the market,” he added.

This article first appeared in digitaledge Daily, on August 4, 2015.