What If Greek Elections Blow Up this Sunday?

kimeng

Publish date: Fri, 15 Jun 2012, 09:55 AM

Warrants Highlight

What If Greek Elections Blow Up this Sunday?

Throughout the Euro crisis, we have always been saying that the Europeans kept ‘kicking the can down the road’. Well, here we are at the junction again. This Sunday, the Greeks will be going to the voting booth and literally deciding whether Greece will remain in the common currency. Analysts are afraid that if the leftist Syriza party forms its ‘non-austerity’ government, other governments will drop its rescue package and boot Greece out of Euro.

If Greece turns ugly
The Institute of International Finance (IIF) estimated that the cost of Greece exiting euro could potentially exceed EUR 1 trillion. It will also cause serious concerns on the fate of the rest of the PIIGS. Such uncertainty will put downward pressure on the global stock markets.

Investors who are pessimistic on the elections outcome could consider buying put warrants to leverage their bearish view or to protect their existing stock portfolio.

Single Stock Put Warrants

Code	Name	Type	Expiry	Exercise Price
QR6W	CapitalaMBePW121203	Put	03-Dec-12	2.60
QR5W	KepCorp MBePW121101	Put	01-Nov-12	9.00
QR4W	SembMar MBePW121203	Put	03-Dec-12	4.20
QR3W	UOB MB ePW121001	Put	01-Oct-12	16.40
QO9W	DBS MB ePW121001	Put	01-Oct-12	13.00
P1BW	GentingSMBePW120801	Put	01-Aug-12	1.60

Put warrants allow investors to potentially earn a profit when the underlying falls. Unlike call warrants, put warrant prices 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.

Index Put Warrants

Code	Name	Type	Expiry	Exercise Price
QG4W	HSI18200MBePW120730	Put	30-Jul-12	18200
PB0W	HSI18000MBePW130130	Put	30-Jan-13	18000
QE9W	STI 2850MBePW120831	Put	31-Aug-12	2850
PA8W	STI 2800MBePW130131	Put	31-Jan-13	2800
QN6W	CN7600MBePW120730	Put	30-Jul-12	7600
QP5W	CN7500MBePW121129	Put	29-Nov-12	7500
QD1W	CN8000MBePW130130	Put	30-Jan-13	8000

Index warrants allow investors to express their views on the general market direction without the need to stock pick. Investors can also use puts as a hedge against their basket of stocks. For example, if an investor has a portfolio of Singapore stocks, he could choose to buy STI puts to protect against market retreat instead of buying puts for each and every stock in the portfolio.

Singapore Market Wrap

Spain downgrade pushed markets lower

Singapore shares opened on a solemn note due to a weak US session driven by disappointing retail sales. The Straits Times Index struggled to close the gap but was unsuccessful with Hong Kong and China leading the fall. The decline was due to concerns about global growth after Moody's cut Spain's credit rating by 3 notches, just barely above junk status.

The STI dropped 0.5% day-on-day (dod), closing at 2773.8.

Call STI 2750MBeCW120831 (QP9W) exercise level 2,750.*
Call STI 2950MBeCW120831 (QE8W) exercise level 2,950.*
Put STI 2650MBePW120831 (QQ0W) exercise level 2,650.*
Put STI 2850MBePW120831 (QE9W) exercise level 2,850.*

One of the few survivors
Chinese property developer Yanlord was one of the few counters which ended in the green. It rose 0.9% day-on-day (dod) to close at $1.15. Yanlord's good performance in the stock market is consistent with the release by the Central Bank that home loans in Shanghai rose for the first time in four months. According to Yanlord's company presentation, Shanghai contributed to 70.3% of its property sales and 50.1% of its GFA contribution.

Call Yanlord MBeCW120801 (O8XW) exercise price $1.15.*
Call Yanlord MBeCW121203 (QR2W) exercise price $1.00.*
Call Yanlord MBeCW121002 (P8LW) exercise price $1.40.*

STXOSV won NOK1.4Billion contract
After market hours, STX OSV Holdings, a global shipbuilder of offshore and specialized vessels announced on SGX that it had won a contract close to NOK1.4 billion (about S$300m). The 156.7m construction vessel is scheduled for delivery in Norway in 2Q14. STX OSV closed at $1.42, down 2.1% day-on-day (dod).

Call STXOSV MB eCW121203 (QR8W) exercise price $1.50.*

Overnight Market Wrap

Worse than expected jobless claims

The S&P500 rose 1.1% yesterday to 1,329.10. Initial jobless claims for the week ending June 9 was at 386,000, compared to a Bloomberg survey of 375,000. Previously, it was reported that US unemployment rate in May was at 8.2%, compared to 8.1% in April.

German Chancellor Angela Merkel warned yesterday that Germany's powers are "not unlimited" in tackling the crisis and other world leaders need to act together. Reuters reported that central banks of major economies are prepared to take coordinated action if the Greek elections turn sour this weekend.

Overnight Markets

Indices	Last	Change
STI	2773.81	-0.5%
HSI	18808.40	-1.1%
DJIA	12651.91	1.2%
S&P 500	1329.10	1.1%
Nasdaq	2836.33	0.6%

Corporate News

Corporate Announcements

STX OSV won a contract close to NOK1.4 billion (about S$300m) to build a construction vessel for Ocean Installer and Solstad Offshore.

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