JP Morgan Claims First with HKD FX Warrants
Posted by Colin Lambert. Last updated: November 27, 2023
JP Morgan has introduced new Hong Kong dollar pair FX Warrants in the Hong Kong market, making it, the bank says, the first issuer in Asia to introduce FX Warrants with CNH/HKD and JPY/HKD as underlying currencies pairs.
The new warrants began trading on the Hong Kong Stock Exchange on 23 November, the bank says it also plans to issue five additional currency pairs in the coming months.
“The introduction of HKD pair FX Warrants in Hong Kong complements JP Morgan’s existing offering of a wide range of equity-linked warrants, providing investors with an alternative investment tool to diversify their portfolio,” says Yowjie Chien, global head of warrants and options electronic client solutions at JP Morgan. “As FX Warrants are linked to currency movements, they typically have lower implied volatility, resulting in a more cost-effective buying option. Additionally, the FX Warrants also offer investors an efficient way to hedge their currency exposure.
The bank says the new FX Warrants, linked to currency pairs with foreign currencies as the base currency and HKD as the quote currency, align with growing investor demand. This convention not only supports investors’ ability to analyse currency movements but also empowers them to capitalise on directional views, it adds. The warrants also enable investors with overseas assets to manage foreign exchange risk and hedge against currency fluctuations.
“FX Warrants as a hedging instrument on currency risk are flexible and they do not require any collateral or margin requirements,” explains Cedric Cheung, head of listed structured products sales for Asia at JP Morgan. “The downside risk is limited to the warrants premium whereas the upside potential can be captured. This makes FX Warrants an attractive and convenient solution for investors looking to mitigate against currency fluctuations and optimise their global asset allocation.”