The Straits Times / The Business Times News on Cosco

Warrant Watch: Cosco's sharp rise sparks fresh contract

THE run-up in Cosco Corp's share price has been so sharp that at least one warrant issuer - Deutsche Bank - has been forced to launch new warrants to satisfy investor demand. In the space of two weeks, Cosco has rallied 30.2 per cent. Yesterday alone, it gained 14 cents to close at a record high of $3.58, on 11.4 million shares traded.

Cosco's meteoric rise means that existing call warrants issued by foreign banks on the counter are 'deep in the money'.

A call warrant lets an investor buy into a stock or an index at a preset or strike price over a period of three to nine months.

Cosco's closing price is now way above the strike prices of most of the warrants on the market.

Deutsche Bank's existing call warrants, for instance, have strike prices ranging from $2.784 to $3.033. 'Cosco has performed extremely well. To meet the demand of investors, we have issued new warrants with the right spot prices,' said Deutsche Bank vice-president Sandra Lee yesterday.

Deutsche Bank's new call warrant on Cosco has a strike price of $3.58 and expires next January.

The fresh issue came amid buy calls on Cosco by several research houses after the firm won shipbuilding contracts worth US$1.2 billion (S$1.85 billion) last week. UOB Kay Hian, for instance, has a buy call, with a target price of $4.12.