The first batch of KLCI warrants started trading on the Singapore Exchange last week. They were launched by French bank Societe Generale (SG) and comprise two calls and three puts.

The Malaysian benchmark recently hit a new high, spurred by record palm oil prices and expectations of a general election in March or April.

This suggests that the KLCI may be in for volatile times, prompting traders to take fresh positions on contracts issued on the index.

Last Friday, the KLCI fell 21.2 points, or 1.45 per cent, to close at 1,439.

It bucked the regional declining trend to touch a record high of 1,524 points last Monday, with expectations that a general election would be held in March or April fuelling the broader market.

The KLCI is now only one of two indexes in Asia still trading in positive territory this year.

Its strong showing has made it the second-best performing stock benchmark in Asia so far this year, after China's CSI 300 Index.

'However, fears that the US economy is now in a recession is giving investors the jitters, as the US is South-east Asia's largest export market. A recession there will be a drag on Malaysia's economy,' Mr Ooi Lid Seng, SG's vice-president of structured products for Asia, excluding Japan, said.

He highlighted two contracts offered by the French bank.

Investors who believe the bullish trend is likely to continue can consider a call warrant expiring on June 30 at a strike level of 1,550 points.

On the other hand, those who have a bearish view of the Malaysian benchmark can consider a put warrant, also lapsing on June 30, that pays out if the index drops below the 1,450-point level.

Mr Ooi has a neutral view of the KLCI's short-term technical outlook.

The index has fallen by more than 9 per cent from its record high of 1,524 points, he said.

He noted that support in the short term would be found at 1,416 points, while the resistance level should hold at 1,480.

yanghw@sph.com.sg