International finance group Investec plans to extend its covered equity warrant offering in the Irish stock market in the next couple of weeks.
It is finalising a new listing of shorter-dated warrants on existing stocks, which will offer investors a higher level of gearing, the head of Investec's Irish equity warrant desk, Mr Declan Maher, said.
Investec offers put and call warrants with an expiry date of March 2004 on five of the top stocks in the Irish market. It plans to introduce similar warrants but with a shorter maturity.
The new put and call warrants on AIB, Anglo Irish Bank, Bank of Ireland, CRH and Ryanair will be introduced within two weeks and will expire in September this year.
Investec is considering issuing warrants on three additional companies, believed to be Independent News & Media, Irish Life & Permanent and Kerry Group.
It may also issue warrants on some British stocks, such as Vodafone, but list them on the Irish Stock Exchange. However, it must first decide whether to price them in euro or sterling, Mr Maher said.
The covered warrants are like options, giving investors the right to buy or sell the underlying shares at a pre-determined price up to a specific date.
Mr Maher said Investec was happy with the way trading in the warrants had gone in the three months since they were introduced to the Irish market, although volumes remain light.
"We knew it was going to be slow progress, we always anticipated that. But the market will see over time how it works and how to use them to advantage in equity portfolios," he said.
Investec said 1.4 million warrants were traded in November but this dipped to 750,000 in December, hit by the Christmas lull. However, trading has picked up again in January, with 2.4 million warrants traded, helped by the uncertainty caused in stock markets by the Iraqi situation.
Warrants in AIB, Bank of Ireland and Anglo Irish had proved the most popular, Mr Maher said. The products have mainly been taken up by sophisticated private investors and proprietary trading desks at the Irish brokers.
Investec, which has been an active player in the equity warrant market in Johannesburg since 1997, is the first financial institution approved to offer such derivative products in the Irish market.
