TIDMDTL
RNS Number : 3291A
Dexion Trading Limited
18 February 2014
Dexion Trading Limited (the "Company")
January Net Asset Value
The net asset value of the Company's Shares as of 31 January
2014 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
136.84 pence -2.05% -2.05%
-------------- ---------------- ----------------
In calculating the Company's Net Asset Value the Company's
Administrator will rely solely upon the valuation of GBP
denominated Permal Macro Holdings Limited ("PMH") Class A shares
provided by PMH. The Investment Adviser and third party service
providers to PMH, rely on estimates of the value of Underlying
Funds in which PMH invests, which are provided, directly or
indirectly, by the managers or administrators of those Underlying
Funds and such valuations may not be considered 'independent' or
may be subject to potential conflicts of interest. Such estimates
may be produced as at valuation dates which do not coincide with
valuation dates for PMH and may be unaudited or may be subject to
little verification or other due diligence and may not comply with
generally accepted accounting practices or other valuation
principles. The Investment Adviser may not have sufficient
information to confirm or review the completeness or accuracy of
information provided by those managers or administrators. In
addition, these entities may not provide estimates of the value of
Underlying Funds in which PMH invests on a regular or timely basis
or at all with the result that the values of such investments may
be estimated by the Investment Adviser. Both weekly estimates and
bi-monthly valuations may be based on valuations provided as of a
significantly earlier date and hence the published valuation may
differ materially from the actual value of PMH's portfolio. Other
risk factors which may be relevant to this valuation are set out in
the Company's prospectus dated 12 March 2008.
Monthly Portfolio Review
Investment Adviser Portfolio Outlook
Managers' caution towards emerging markets has proven justified
and the consensus view is that the impact on developed markets is
unwarranted, particularly with the continued economic recovery in
the US. And while the most recent US payrolls report may have been
disappointing, the growth backdrop remains fairly strong for 2014,
particularly in light of a lessening of the fiscal drag, strong
corporate demand and the likely rebound in manufacturing PMI. In
Japan, "Abenomics" has clearly borne fruit; we have seen a rise in
inflation and in inflation expectations. Given these developments,
the Bank of Japan may not increase its current monetary easing in
the short term; however, the effects of the upcoming tax hike on
growth and any deflationary concerns could prompt further action in
the second quarter of this year, giving renewed impetus to the
Japan reflation trade. In Europe, the fragile recovery continues to
unfold. Emerging markets, on the other hand, are set to remain
under pressure for some time as they are weighed down by a
reduction in liquidity and a slowdown in the Chinese economy. The
most vulnerable countries are those with high current account
deficits that relied for years on abundant foreign capital inflows.
These are now reversing as the Fed gradually withdraws from its
accommodative policy. Despite the risk aversion that has permeated
markets since the start of the year, managers maintain a high
conviction in their trades. The diverging policies being adopted by
monetary authorities in the developed world, from tapering to
quantitative easing, opens up an incredibly rich macro opportunity
set. Elsewhere, the European Central Bank is expected to remain
dovish, while the Bank of England is likely to adopt a hawkish
stance in light of positive economic momentum. Managers are also
seeking to capitalise on the decoupling between emerging and
developed markets.
Market Overview
Global equity markets finished lower in January, primarily on
concerns about a slowdown in the emerging markets. In the US,
weaker-than-expected jobs data, mixed corporate earnings releases,
the impact of the dire weather and uncertainty regarding the Fed's
plan to continue scaling back its asset purchasing programme
dominated headlines. Towards month-end, the Fed announced it would
taper monthly asset purchases from $75bn to $65bn. In Europe,
equities initially advanced on the back of positive earnings
releases and the ECB President's statement that monetary policy
would remain accommodative "for as long as necessary", but
ultimately finished the month lower. In Asia, Chinese manufacturing
data showed activity had slowed to a six-month low, igniting fears
of an economic slowdown and triggering a sharp, late-month sell-off
in global equity markets. Additionally, continued concerns about
China's "shadow banking system" pushed equity markets lower. While
managers retain their conviction in the US recovery story and Japan
reflation trade and maintain their long positioning in US and
Japanese stock indices, they have generally reduced their net long
index exposure in light of recent risk aversion.
The JP Morgan Global Government Bond Index (local currency) was
up in January as the yield on the 10-year US treasury dropped by
nearly 40bp and the 10-year yields in the UK and Germany ended
lower. The Merrill Lynch High Yield Master II Index increased
marginally while the JPMorgan EMBI+ Index declined. Developed
market bond yields reversed dramatically following December's rise,
despite the news of further tapering from the Federal Reserve.
Investors flocked to safe-haven assets on the back of weak US jobs
data and an increasingly bearish outlook for emerging markets
following weaker Chinese economic data and idiosyncratic events in
Argentina, Turkey and the Ukraine. In the US, managers continue to
favour short exposure to US government bonds in light of the
continued US economic recovery. They believe the recent correction
(in January) in yields to be temporary, although caution that the
path upwards for yields will be a volatile one, a situation that
requires tactical trading. They are short the UK, where the
economic backdrop is also strong. In Europe, they continue to be
long the euro curve. Certain managers are also long European
peripheral bonds given improving economic data in this region.
In natural resources, crude oil prices declined on news of
larger-than-expected US stockpiles. Natural gas prices, however,
climbed markedly higher for the third consecutive month on colder
weather across the US. Gold prices increased as investors' appetite
for wealth protection returned on concerns about the health of
certain emerging market economies. Base metals prices moved broadly
lower on weak Chinese manufacturing data and a strengthening US
dollar. In agricultural commodities, soybean prices declined on
news of importers cancelling US purchases, fuelling concerns that
China would shift purchases away from the US. Wheat prices also
moved lower on ample world supplies, while corn prices climbed on
stronger-than-expected export demand and processor buying. Whilst
light, exposure is generally expressed through short gold
positions.
Currency markets saw dramatic reversals in January, marked by
safe-haven buying, including the notable reversal of the Japanese
yen versus the US dollar and euro following months of declines.
During the month, emerging market currencies were under acute
pressure following signs of weakness in China, with an extreme
example being the Argentine peso, which dropped nearly 20% against
the US dollar. Emerging market central banks scrambled to take
interest rate and policy actions to stabilize the downward spiral.
The Canadian dollar was also hard hit as Canadian unemployment rose
from 6.9% to 7.2%, increasing expectations that the Bank of Canada
would cut interest rates. The Australian dollar fell to its weakest
level in nearly four years on speculation that the Reserve Bank of
Australia would weaken the currency to boost exports. Managers are
long the US dollar and sterling given favourable growth dynamics in
each country. In particular, long US dollar against Japanese yen
remains a prominent position for the majority of the managers in
the company's portfolio. They also typically hold long exposure to
the US dollar against various emerging market and commodity
currencies, in particular the Canadian dollar, given the pressures
on emerging markets and the deteriorating outlook for
commodities.
Strategy Overview
Discretionary: -2.08%. Although the majority of the managers had
expected emerging markets to remain under pressure, at least in the
first half of this year, they suffered from the collateral damage
that impacted developed markets. In particular, they incurred
losses from the "Japan reflation" trade, expressed mostly via long
Japanese equity indices and short the Japanese yen, as well as the
long "US recovery" trade in light of the sell-off in US equities.
The reversal in bond yields in the US, the UK and Germany also
proved detrimental. The long US dollar bias against emerging market
and commodity currencies, although prescient and additive to
returns, was unable to offset losses in other sectors.
Systematic: -2.16%. The largest losses came from trend following
managers as many of the trends, which had been witnessed through
most of the latter part of 2013, reversed violently in January.
Long bond positions were profitable, but these gains were not
enough to offset losses from long equities, short precious metals
and short Japanese yen positions. The allocation to non-trend
managers helped offset some of the losses amid profitable currency
trading - namely long Japanese yen and short Canadian dollar
positions.
Thematic: -0.81%. The safe-haven rally in gold prices during the
period resulted in gains in gold-related equities; however, these
did not sufficiently offset the losses emanating from long
positioning in crude oil and short exposure to corn. In addition,
certain managers suffered as indiscriminate flight-to-safety
selling drove long positions lower despite strong fundamentals.
Strategy Allocation Number of Performance by
as of 31 January managers as strategy %
% of
31 January
------------------ ------------------ ------------- -----------------
January YTD
------------------ ------------------ ------------- --------- ------
Discretionary(1) 66 15 -2.08 -2.08
------------------ ------------------ ------------- --------- ------
Thematic 11 7 -0.81 -0.81
------------------ ------------------ ------------- --------- ------
Systematic(1) 14 7 -2.16 -2.16
------------------ ------------------ ------------- --------- ------
Other(2) 2 7 - -
------------------ ------------------ ------------- --------- ------
Cash 7 - - -
------------------ ------------------ ------------- --------- ------
Total 100 35(1)
------------------ ------------------ ------------- --------- ------
(1) Discretionary and Systematic have one manager in common.
(2) Funds in liquidation
Strategy returns are in US$, net of underlying manager fees
only, and not inclusive of either Dexion Trading's or PMH's fees
and expenses.
Supplementary Information
Click on, or paste the following link into your web browser, to
view a full review of the Dexion Trading Limited portfolio.
http://www.rns-pdf.londonstockexchange.com/rns/3291A_-2014-2-18.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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