BEIJING, June 6 -- Stock warrants yesterday picked up from last Friday's plunge, boosted by a rally of the market's regular shares.

    Stockbrokers and traders said that the greater synchronized movements of the prices of shares and share warrants was an indication of the increased maturity of the market. As such, share warrants have now become a bona fide investment instrument for savvy risk-takers rather than a gamblers' choice, stock analysts said.

    They predicted that stock warrants will continue rebounding and edge upward if the key market Shanghai Composite Index hovers at around 1,700 points. However, they cautioned that room for a further rise is limited given that the prices of most warrants have surged well above their intrinsic value, said analysts.

    In yesterday's trading, 10 of the 26 warrants currently available in the China stock market posted gains. The warrants of Wuhan Steel and Baotou Steel rose by as much as 20 per cent.

    "The rebounding of stock warrants is largely attributable to the good performance of regular stocks. As we can see the performances of the two are becoming more interlocked than ever," said Li Guanzheng, an analyst with Guotai Jun'an Securities.

    Since May this year, the daily turnover of stock warrants has been hovering at high levels as much as 20 billion yuan (US$2.5 billion). Stockbrokers said combined turnover in share warrants on the stock exchanges of Shanghai and Shenzhen have overtaken Hong Kong, making the Chinese mainland the biggest market for the investment instrument.

    Hectic trading in share warrants was largely fuelled by the stock market rally which took the index up by as much as 40 per cent to be well over 1,600 points and the daily turnover of regular stocks quadrupled to 50 to 60 billion yuan (US$6.25 to US$7.5 billion).

    Warrants proved to be popular because of their high liquidity, as they are settled on the day of transaction. Furthermore, as highly leveraged instruments, warrants can generate multiple returns at high risk.

    In the past, most investors in the warrants market were individual investors who were attracted by the leverage play of the instrument. Now, stockbrokers said that more and more institutional investors and corporate treasuries of domestic enterprises are now stepping into the market.

    All of the 26 warrants plunged last Friday by as much as 20 per cent on a risk warning notice released by the Shanghai Stock Exchange.

    The notice reminded investors that Baosteel's stock-purchase warrants, the first among all warrants, are to expire on August 30 and that investors may suffer huge losses if the intrinsic value realized falls short of the warrant price.

    The exercise price of the Baosteel warrant has been adjusted to 4.2 yuan (53 US cents) per warrant and the company's regular stock closed at 4.39 yuan (55 US cents) per share.