Greek Tragedy - SQ Stops Flying, ECB Stops Lending

kimeng

Publish date: Fri, 18 May 2012, 10:01 AM

Warrants Highlight

Greek Tragedy - SQ Stops Flying, ECB Stops Lending

Code	Name	Type	Expiry	Exercise Price
QE9W	STI 2850MBePW120831	Put	31-Aug-12	2850
PA8W	STI 2800MBePW130131	Long Dated Put	31-Jan-13	2800
QD2W	CN8200MBePW120628	Put	28-Jun-12	8200
QD1W	CN8000MBePW130130	Long dated Put	30-Jan-13	8000
QF4W	HSI18800MBePW120628	Put	28-Jun-12	18800
P9NW	HSI19800MBePW120628	Put	28-Jun-12	19800
PB0W	HSI18000MBePW130130	Long Dated Put	30-Jan-13	18000

SQ drops Athens
On Wednesday, Singapore Airlines announced that it will suspend services to Athens and Abu Dhabi due to “sustained weak performance” on both routes. The suspensions are due to the company’s policy to match capacity to prevailing market demand.

ECB drops Greek banks
Another bombshell was dropped on Greece on the same day with the European Central Bank saying that it will temporarily stop lending to some Greek banks to limit its risk, pushing the responsibility for lending onto the Greek central bank until these banks have sufficiently boosted their capital.

The announcement comes after ECB’s President Draghi acknowledged for the first time that Greece could leave the monetary union. While the ECB’s “strong preference” is that Greece stays in the 17-nation euro area, it has to preserve “the integrity of the balance sheet”.

Markets drop further
European markets dropped for a third straight day while Hong Kong and Singapore both finished marginally above key levels. The HSI closed down 0.3% at 19,200. Just last week, it was trading more than 1,000 points above yesterday’s close. Similarly, in Singapore, we were above the 2,900 just last Thursday and above the 3,000 level two Thursdays before.

Protect yourself from drops
A put warrant gives the holder the right (but not the obligation) to sell the underlying share/index for a fixed price (the exercise price) at a specific future date (the expiry date).

Put warrants allow investors to potentially earn a profit when the underlying falls. Unlike call warrants whose prices tend to move in the same direction as the underlying, put warrants will tend to move in the opposite direction to the underlying, increasing in value as the underlying falls and decreasing in value as the underlying rises.

For example, HSI put warrant P7ZW gained 16.5% ($0.079) as HSI futures came off 0.8% yesterday.

Singapore Market Wrap

Downtrend Continues

The STI traded in positive territory most of yesterday. However, selling pressure on European equity markets in the afternoon led jittery investors to clear long positions in the market. The STI ended the session down 0.3% day-on-day at 2,822.61.

Call STI 2950MBeCW120629 (P8BW) exercise level 2,950.*
Put STI 2850MBePW120629 (P8CW) exercise level 2,850.*
Longer-dated Call STI 3100MBeCW130131 (PA7W) exercise level 3,100.*
Longer-dated Put STI 2800MBePW130131 (PA8W) exercise level 2,800.*

Commodity stocks getting sold off
Some commodity stocks were sold off yesterday amidst the late afternoon panic. Commodity chain suppliers Olam (-2.5% dod, $1.74) and Noble (-0.5% dod, $1.085), as well as coal mining company Sakari (-1.9% dod, $1.575) closed in the red.

Call OLAM MB eCW121005 (QF2W) exercise price $2.00.*

Call NobleGrpMBeCW121002 (P8JW) exercise price $1.40.*

Call SakariMBeCW121102 (QE1W) exercise price $1.95.*

STX OSV surrendered recent gains
STX OSV had a volatile trading session yesterday, trading in positive territory in the first half but closing sharply in the red in the afternoon. The stock rallied sharply early this week to a high of $1.645 on Tuesday, but back pedalled 3.7% dod to close at $1.58. Bloomberg reported that this could be due to speculation the sale of STX OSV from its parent company may be delayed.

Call STXOSV MB eCW120801 (P2VW) exercise price $1.80.*

Overnight Market Wrap

S&P500 Fell for the 5th Day

The S&P500 closed 1.5% lower day-on-day at its day low, 1,304.86. Ratings agencies downgraded Greece sovereign credit rating and 16 Spanish banks yesterday. Investors are worried that the worst is yet to come for both countries.

US initial jobless claims were slightly worse than expected at 370,000. Gold rebounded 2.3% yesterday, after a 4-day slide. However, crude oil fell further to $92.56 per barrel.

Overnight Markets

Indices	Last	Change
STI	2822.61	-0.3%
HSI	19200.93	-0.3%
DJIA	12442.49	-1.2%
S&P 500	1304.86	-1.5%
Nasdaq	2813.69	-2.1%

Corporate News

Corporate Announcements

SembMarine secured 3 contracts worth S$130mn

Results Announcement
Tue 29 May: Biosensors 4Q12

Ex-Dividend Date
Thu 17 May: Yangzijiang ($0.055)

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