Macquarie sets up warrants business

Bank builds on existing franchises in Australia and Hong Kong.

Macquarie Bank has become the latest international investment house to set up a warrants business in Singapore, joining Deutsche Bank, DBS and Societe Generale in the resurgent market. It will initially issue six European call warrants on the Singapore Exchange (SGX), with trading scheduled for December 7.

Singapore has recently amended its listing rules and issuers can now participate in the secondary market, thus removing investor concerns about liquidity.

"Under the old system, there was no correlation between share price and what the warrant did," says Matthew Long, who heads Macquarie's warrants business in Singapore. "SGX rules are now consistent with Australia and Hong Kong and we see tremendous potential in this market."

Australia's largest investment banking group enters a market which has turned over more than S$400 million ($244.5 million) in October, and is now home to over 100 listed warrants. According to Long, the bank has had ambitions to issue warrants in Singapore for several years and immediately moved on its instincts following the listing rule change.

Its first Singapore issues will consist of Cosco Corp Singapore, Chartered Semiconductor Manufacturing, Noble Group, Sembcorp Industries, Singapore Telecommunications and Starhub Limited.

The group will also counter the low level of warrant awareness in Singapore by conducting educational seminars and plans to expand its warrant range to around 60 in the not too distant future.

"Presently the Singapore warrants market is at a low base compared to others and education is the key to improving awareness," Long comments. "We'll start with six and then begin quickly launching more."

In Hong Kong, Macquarie Warrants have captured almost 30% of market share by value turnover in first three quarters of 2004, while in Australia the bank also occupies the leading market share with over 45% market share.

Upon its launch Macquarie's Singapore team will consist of three members, with plans to expand the number to four in the coming months.

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