KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL
FANews
FANews
RELATED CATEGORIES
Category Investments

Another option

23 June 2004 Angelo Coppola

Standard Bank has launched a new style investment product - a discount share instalment warrant, designed to provide investors with a simple, low-cost alternative to buying shares directly in the market.

The product is designed to mimic the movement of a range of leading South African shares without having to pay the full purchase price upfront.

Instead of paying the full purchase price of the share on day one the investor will pay an initial instalment (typically 50%) on purchase followed by a second instalment (a completion payment) on expiry, at which point they would take delivery of the underlying share.

In the interim the client has the potential for capital growth, greater returns than holding the share itself (although with greater risk), high liquidity due to the fact that the instruments are listed on the JSE Securities Exchange with the added advantage of two-way prices being quoted by the issuer at all times, limited downside (being the initial instalment amount) as well as leverage without the risk of margin calls.

Says Brett Duncan, Head of Warrants at Standard Bank: “When buying a discount share instalment the investor is buying the underlying share forward at a future date.

The investor will pay around half the value of the share as an initial down payment, with the payment of the balance deferred until expiry.”

With these instruments the holder of the instalment is not eligible to receive the dividend payable on the underlying share. However, the dividend stream of the share is discounted into the price of the instalment upfront.

At maturity discount share instalment holders have two options:

1. They can pay the final instalment and take delivery of the underlying securities.

2. Should they choose not to make the final payment and positive value remains in the instalment this will be paid to them.

Quick Polls

QUESTION

The intention with lockdown was to delay or flatten the Covid-19 infection curve and give both the private and public healthcare sectors time to prepare for the inevitable onslaught. Did the strategy work?

ANSWER

No, the true numbers are not reflected. Almost a quarter of South Africans may already have been infected with Covid-19
It’s too soon to tell. We will likely get a second wave with stringent lockdown regulations in place again
Yes, South Africa bought enough time to make a significant difference. We saved lives and have passed our peak. The worst is over
fanews magazine
FAnews August 2020 Get the latest issue of FAnews

This month's headlines

Ethical behaviour - are you toeing the line?
Latest business interruption developments raise more questions than answers
Brokers remember: You are accountable...
A sustainable pension - How to manage living annuities in uncertain times
Claim stats… life can change in a heartbeat
Are South Africa’s income protection benefit providers ready for COVID-19?
Subscribe now