* Sovereign Asian funds diversifying into assetmarkets
Singapores Temasek announced on Friday that they are moving funds into assetmarkets, mainly commodities. Overnight China´s 80 BN Usd pensionfund announced they are moving 8 BN Usd into private equity funds.
This makes a continued bullish sentiment all the more likely as this bearmarket rally is liquidity driven and liquidity is ample. With important funds setting the example by moving out of bonds and into risky assets, more are bound to follow.
Next to get "long enough" are the real money accounts. Chasing the market further. Valuations and earnings are most likely way overestimated at this point in time, but the market needs to get long before we will see it come crashing down to earth.
I do believe there is a technical short term case for a market setback, but I will not be looking for any substantial moves lower at this point in time in any "normal" distributed markets. Digital ones are a different thing,,,,,
* The Strong Jpy and other assetclasses - correlation breakdown
The correlation between the JPY and assetmarkets has broken down since early March, when the stock market bear rally started. The Jpy is actually as strong or stronger vs the Eur and the Usd now. It seems one plausible reason is the change of behaviour by the Japanese bond investors. Japans foreign currency investments are mostly bond driven.
With the introduction of QE in more foreign countries, undermining the long term bondvalue, it seems the Japanese bondinvestors have turned increasingly inwards. I believe the structural strength of the JPY is therefore likely to continue for the next few months. In 1998, post the LTCM, as liquidity was forced fed to the market , affecting bonds, the JPY strengthened during the fall. Although the JPY strengthening at that time was extremely viscious, dropping USD/JPY from 134 to 111 in 48 hours.,I do not believe this is what we will be witnessing this time around, unless modellers and correlation traders oversell the JPY on the back of rebounding assetmarkets of course,,,,,
*New positions and position changes
- Took profit and squared the remaining half of my long Usd/Zar position
- Dipped my toes, went long Usd/Mxn
As usual, good luck
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2 comments:
What about Swedish banks at this stage? Torbjörn
Hi Torbjorn,
Swedish banks like most other banks, are currently enjoying the ample liquidity environment, relatively steep yieldcurves and the higher retail and institutional marginpossibilities that this environment is offering.
The earnings power is very good in Sweden, although it is quickly coming off in the Baltics. From a positive cashflow aspect it looks quite good. The risk still lies in the potential creditlosses.
I believe the Baltics will become a very severe threat for the banks who are very involved there. The private sector is quickly becoming extinct and I do not believe they will be able to hold their currency regimes til the end of this calendar year.
We are currently in a very much liquidity driven environment where panick buying by institutional investors is the order of the day.
Like everything else in life, enjoy it while it lasts and roll with it. Dont forget to lock in the profits though,,,, I dont expect it to last post end of June.
I got long Swedbank puts and got the sharp move lower within 48 hours. Unfortunately I took my youngest son to town and missed it all. The next day it was all higher again, with no profit taken. Still think it is topping out though. I should know before the middle of next week.
Thank you for the question and best of luck.
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