Posts Tagged ‘adr’

Hedged In on SDS, FXI & FXP as bears wake up early

kodiak-bear1Normally at this time of year, bears are getting their stores in & looking at hibernation, but the recent market has turned that around, with bears dozing most of the summer & now waking up & looking hungry.

Followers of our Twitter account, will know that we have been taking a good look at China over the past 10 trading days & have a very bearish outlook on China going into the 3rd Quarter & by default on the S&P 500. Signals have been coming for a while with the BDI declining at an alarming rate from it’s June highs, flagging up the possibility that China’s economy & associated infrastructure drive are starting to run out of steam.

The Shanghai Composite has been steadily declining. losing in the region of 21% of its value in the last month, today the benchmark index slumped an eye boggling 6.75% at its close. This has prompted me to look at a trade that I have been thinking about for a few weeks, that is neatly hedged & could also be a home run as bearish sentiment hits the markets again.

Shanghai_composite

Having looked at three well traded ETFs , we are placing a trade that is mixing it up a little with SDS :Ultra Short S&P 500, FXI :iShares FTSE/Xinhua China 25 Index & FXP ProShares UltraSh FTSE/Xinhua China 25. The following chart shows the last 5 trading days of SPY, FXI & FXP. As can be seen, there was a clear signal on Tuesday last, that there was a divergence in FXI / FXP, with the S&P 500 mainly trading sideways.

china_v_spy

Now using the Morgan Stanley A Fund CAF as a sentiment monitor for the Shanghai market over the same period against SPY (NYSE: SPY), it would seem that there has been some pretty good correlation over the last 6 months of trading. For me CAF is one of the best tickers to use for real sentiment, as it trades in China A Shares, whilst FXI (NYSE: FXI) is predicated on 25 stocks traded on the Hong Kong market (mostly ADRs). From looking at the charts, it would appear that CAF (NYSE: CAF) actually front runs FXI by a two to three day period & this has helped me immensely in trading Chinese ADRs this summer. At the same time, SPY has followed the FXI trend reasonably faithfully for the last 3 months, until August 17th, when FXI began to dip.

SPY_FXI_CAF

So our feeling is that with China declining at such a rapid rate, Long FXP  (NYSE: FXP) short FXI is a no brainer & we are looking to make some good returns over the next few weeks, we are also adding in a soupcon of SDS for interest & to confirm our bearish sentiment on the S&P 500. With a ratio of 2:1:1 we feel that this is a well hedged play, with a good upside potential.

We are looking to hold this trade for a minimum 10 day period & I have set this trade up on kaChing.com in our test account in order to track it. The idea being that we can give a visual on the performance of the trade & also  a good term of reference when we close out the positions & reblog.

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MyStockVoice.com is now alive & kicking

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It’s taken a while & it’s been an interesting experience, but am pleased to say that we released MyStockVoice.com into public beta. For me personally, there have been a few challenges, “assisted” along the way by re-locating with my family from Switzerland to Slovakia.

The team at Connection Services who have designed & support the MSV platform have been excellent, especially when responding to an ever changing set of requirements. MyStockVoice started as this WordPress blog, where I could muse on my views on Emerging Markets & BRIC economies. A conversation with a friend who works in the City (London) encouraged me to look at doing something a little more. The original format, was a forum, then a newswire service & now it’s a fully fledged blog publication platform. So you can imagine how happy my colleagues at CSL were, when I tripped back every few months & said “right, this is what we are doing now”

Our aim at MSV is to provide an ever widening audience with value insights into what is rapidly becoming a major topic for hedge funds, investment managers & retail investors alike : BRIC & Emerging Markets. International stocks traded on US exchanges are becoming ever more popular, especially via Depositary Receipts (ADR,ADS,ADN) , for the more cautious or long minded, a number of ETF (Exchange Traded Funds) have sprung up to service the appetite to take part in these growing economies.

Covering all the major regions, MSV provides focussed channels into a variety of sectors & also specific categories for Macro Econmics, ADR & ETF investing. We are pleased to be working with some well established names from the investment community, along with faculties such as Knowledge at Wharton, the Economics Faculty at Beijing University, Skolkovo Business School in Moscow & Cranfiedl University in the UK.

Our strapline is “your community … your voice”  & to reflect this, we will be bringing our readers plenty of new unique content. Much of my time in the last two to three months has been spent contacting individual bloggers & also online media services that are based in the regions covered. In this way, we can present a “blend of thought”, that will allow our subscribers to formulate informed opinions on their own particular areas of interest.

So, enough jawing from me, but to close, Alex, Chris & myself would like to thank the team at CS & all the people that have had input into the project. We sincerely hope that you enjoy the MSV experience & are always open to new ideas, partnership opportunities & most of all feedback.

Many thanks

Paul

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Brazil & ADRs (American Depository Receipts)

 

Was talking with someone a little earlier on Skype chat on Latin America & where these markets are headed when the Dow & NASDAQ & other western bourses are getting slammed.

Interestingly enough, although most indexes on LatAm are way down on a YTD basis, they are all showing signs of moving off their lows at present.

Brazil in particular seems to be attracting inward cash flow, which you can see here on Bank of New York Mellon’s ADR site

The chart below gives you an idea of where Brazil is going when compared to BoNY’s 100 Developing Markets Index, just starting to peak upward. Definitely worth keeping an eye on. With todays momentum, it looks as though its going to break a 10% gain.

Another increasing development is the ensuing wave of consolidation going on within Brazil’s banking industry, as outlined in the New York Times blog.

Banking mergers may be cooling down in the United States, but in Brazil they are just heating up.

The state-controlled Banco do Brasil announced Thursday that it was buying a 72 percent stake in Banco Nossa Caixa for 5.4 billion reals, or about $2.25 billion.

The all-cash deal comes just three weeks after a deal valued at 38.1 billion reals, or about $17.7 billion, was announced between the Brazilian banking giants Banco Itaú and Unibanco. That merger would create the largest bank in the southern hemisphere, with 21.5 percent of the nation’s deposits under its roof.

By acquiring Banco Nossa Caixa, Banco do Brasil would become only the nation’s second-largest bank, much to the chagrin of the Brazilian government.

“We want Banco do Brasil to be far bigger than any other bank in the country,” President Luiz Inácio Lula da Silva of Brazil told reporters on Tuesday.