THE recent plunge in CapitaLand shares and news that the company is offering a convertible bond issue are drawing traders into fresh positions on warrants for South-east Asia's biggest developer.
CapitaLand shares fared better than other property plays during the recent sub-prime selldown, but they took a beating last week. They plunged 73 cents for the week, ending 10 cents down at $5.80 with 37.3 million units done last Friday. Mr Ooi Lid Seng, Societe Generale's (SG's) vice-president of structured products for Asia excluding Japan, said: 'The counter has dropped about 12 per cent in the last five trading days.'
One reason was the recent slew of analyst reports urging investors to exercise caution with property stocks. For example, Citigroup cut target prices for CapitaLand and City Developments last week, citing an expected moderation in office and residential prices.
Also last week, CapitaLand announced plans to raise $1.3 billion via a 10-year convertible bond issue. With a conversion price of $8.614, the bond pays a coupon rate of 3.125 per cent a year.
Mr Ooi highlighted a CapitaLand call warrant offered by SG for those who hold a positive view of the company. It has a strike price of $6 and expires on July 14. No trades were done last Friday.
Last Friday, the most active SG CapitaLand contract was a call warrant with an exercise price of $6.22 that lapses on July 7. That contract closed 2.5 cents lower at 21.5 cents with 5.07 million units done.
Another active SG CapitaLand contract was a call warrant that expires on March 10 with a strike price of $6.70. Last Friday, it ended one cent down at two cents with 150,000 units traded.
In Mr Ooi's view, the short-term outlook for CapitaLand shares is negative. He added: 'The counter is likely to retest the $5.92 level should it rebound with minor support at $5.40.'
A call warrant lets an investor buy into a stock or index at a preset price over a period of three to nine months.
A put warrant allows an investor to sell the stock or index at a preset price over a fixed period of time.
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