Zero certs, which listed on the Singapore Exchange on June 8, take the form of a European-style, cash-settled call warrant, with an exercise price of zero – hence the term ‘zero strike’, said Miles Ashton, ABN Amro’s Hong Kong-based head of sales and public distribution for private investor products for Asia. “We have a highly transparent, non-leveraged product that does not have the costly effect of implied volatility,” he added.
Zero certs allow investment in emerging local markets that are performing well but are difficult to access due to foreign market trading restrictions and settlement intricacies, said ABN Amro in a statement. They give easy access to shares and other financial instruments domiciled in foreign markets and allow overseas investment exposure without having to buy individual shares, added the bank.
ABN Amro currently offers eight country-based certificates linked to emerging markets in Indonesia, Malaysia, the Middle East, the Philippines, Pakistan, Thailand and Turkey, as well as a Bric (Brazil, Russia, India and China) index.
“There is a good appetite for these new products in Singapore, as they offer an alternative from the traditional warrants trading business or mutual fund business,” said Ashton. “In a market that right now offers few opportunities that cover emerging markets or thematic-type certificates, we can differentiate ourselves from our competitors.”