The average monthly trade of derivative warrants (DWs) this year could be 60-70 billion baht a month after DW trading rose by more than 70% in January, says Macquarie Securities Thailand.
The firm's forecast of 60-70 billion baht is a 40% increase from 2017.
High volatility in the stock market earlier this year contributed to active DW trading, with monthly average trading rising by 72.3% in the first month of this year, up from 47.8 billion baht logged at the end of last year, said Noppadon Duangthipnest, head of derivative sales at Macquarie Securities Thailand.
DW trading at of the end of 2013 registered 2.1% and gradually rose to 5% in 2017.
Mr Noppadon said the Stock Exchange of Thailand making several all-time highs in January was the main factor enticing fund flows into DW products, resulting in the trade of single-stock DWs registering a high of 56.35 billion baht.
Heavy trading of single-stock DWs was seen in the energy sector, which benefited from a rise in global oil prices. The most-active stocks were identified as BANPU, BCPG, PTT and PTTEP.
Trading of these active DWs represented a respective 3.7%, 2.2%, 2.1% and 1.6% of total DW trading valuation.
Macquarie Securities expects DWs of large-cap stocks to continue to be the most popular, especially for energy and petrochemical stocks, due to global oil price fluctuations.
Investors have a greater understanding of DW investment, whereby they can analyse market trends and movement in share prices and decide to invest in DWs instead of underlying stocks as they spend less money to generate high-leverage returns, Mr Noppadon said.
For example, investors recognised that oil prices would rise in January and locked in returns through DW investments. Energy stock prices rose 10-15% for a week in January, but DWs generated 20-30% returns at the same time.
The Securities and Exchange Commission is considering adding more underlying assets for DWs such as the global stock index and global single stocks, in addition to allowing DWs for the SET50 index and listed companies in the SET100.
