TIDMDTL
RNS Number : 9484V
Dexion Trading Limited
20 January 2012
Dexion Trading Limited ("the Company")
December Net Asset Value
The net asset value of the Company's Shares as of 30 December
2011 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
133.87 pence -0.32% -3.12%
-------------- ---------------- ----------------
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 12th March 2008.
Monthly Portfolio Review
Investment Adviser Portfolio Outlook
While economic data from the US has been surprising on the
upside, many managers continue to maintain a cautious view on the
global economy. They believe that despite recent positive reports,
the US still faces considerable challenges, notably a high, albeit
declining, unemployment rate, a weak housing sector, a considerable
amount of leverage in the system, as well as political gridlock
over key issues such as the extension of the payroll tax break and
unemployment benefits. The situation in Europe remains equally
negative with data suggesting that a recession is unfolding in the
region. Slowing growth will be aggravated by austerity measures,
there is a strong likelihood of further sovereign downgrades, and
the issues surrounding debt continue to exist with no comprehensive
solution in sight. The outlook for the UK also remains negative
with the economy weighed down by sluggish wage growth and fiscal
austerity. The emerging markets continue to suffer from declining
trade activity from developed markets. An additional concern is
European bank exposure to emerging markets, which is substantial
and likely to contract as the banks de-lever. Managers believe that
emerging market central banks will cast aside inflationary
concerns, which are already diminishing, focusing instead on
stimulating growth by cutting interest rates. In this environment,
global monetary policy will remain accommodative, particularly in
relation to the US, which is benefiting from relative
outperformance. While 2011 was often characterised by markets
entering unchartered territory, which resulted in managers having
difficulty expressing some fundamental, well-thought out trades,
the Investment Adviser believes that the 2012 macro environment
offers a number of profitable trading opportunities which the
Portfolio's managers should capture successfully. In that regard,
there have been a series of encouraging trends over the past few
weeks. For example, market action in many sectors has been
increasingly aligned to managers' views. In addition, there has
been a decrease in correlation between various asset classes.
Market Overview
Market participants were optimistic heading into December,
supported by stronger US data, constructive rhetoric from Europe,
coordinated central bank liquidity measures and easing in China. In
the US, the unemployment rate fell to 8.6% and many major retailers
reported record sales over the Black Friday weekend. However,
demand for risk assets fell as the European Central Bank ('ECB')
cut its policy rate by 25 basis points, but failed to signal a bond
buying program. Market sentiment became more disappointing
following the European Union summit, as it offered few new measures
and did nothing to diminish the risk of credit downgrades. Standard
& Poor's warned that 15 of the 17 eurozone members could face
credit downgrades, while Fitch warned of downgrades for six
eurozone countries. Any hopes of emerging market decoupling were
diminished as data showed that Indian industrial production
experienced a sharp decline, while China had to cope with lower
growth in order to keep inflation under control. In the week
leading up to Christmas, risk assets reversed sharply as the ECB
announced new measures to stem the region's crisis, offering
unlimited three-year loans to the region's banks as part of their
long-term refinancing operation. European banks tapped an
unprecedented EUR489.2 billion from the ECB, far higher than market
expectations. News from the US also helped to boost risk appetites
as initial jobless claims dropped, while housing starts and
consumer spending increased. In addition, the US congressional
deadlock was upended as House and Senate leaders agreed to a
two-month extension of the payroll tax holiday and unemployment
benefits. By the end of the month, risk assets were mixed amidst
light volumes. Italy's short-term auction went well, but the
subsequent longer term auction failed to raise the maximum amount
sought. News out of the US continued to be positive, with further
improvement in the jobs market and an increase in consumer
confidence.
Global equity markets entered the month on a positive note,
rallying strongly as US payrolls increased and manufacturing PMI
also experienced an upward trend. However, by the end of the month,
market participants re-focused on the never ending debt crisis in
Europe. Stock markets rallied briefly following the EU summit on
December 9, however global markets were ultimately disappointed
with the results. The sell-off continued throughout most of the
first half of the month, before markets posted a strong rally in
the week before Christmas on the back of Europe's Long Term
Refinancing Operation ('LTRO') measures and positive US economic
reports, including a decline in jobless claims and an increase in
housing starts and consumer spending. Towards the end of the month
markets were largely flat amid light volume; however, risk assets
wavered somewhat in the final trading days of the year as investors
considered the outlook for 2012. Exposure to the equity sector is
minimal. Outside of the US, managers are trading with a bearish
bias in light of the unresolved European sovereign debt issues and
global economic slowdown; however, they remain mindful of the
possibility of short-term rallies. Within the US, they are
expressing the country's relative outperformance through long
positions in US financials versus broad European indices.
Global bond yields continued to fall in December on the back of
increased risk aversion. In the US, 10-year yields fell to an
intra-month low of 1.81%, before better-than-expected economic data
triggered a reversal in the bond markets. Towards the end of the
month, appetite for US debt was renewed as investors sought a safe
haven amid continued eurozone concerns. Two-year yields hit record
lows after the Office for National Statistics said the services
sector, which accounts for about three-quarters of the UK economy,
saw output decline by 0.7% since September. For the same reason,
10-year gilt yields fell below 2% for the first time. German bund
yields also fell, while peripheral yields continued to widen
marginally, led by Greece and Italy. The current bias in global
government bonds is to be long. Managers are conveying their
pessimism on the eurozone through long positions along the euro
curve, and especially at the front end. Some managers also hold
long positions in UK government bonds, where growth is slowing, as
well as in US treasuries, where they continue to express the "lower
for longer" theme.
The euro continued to dominate headlines in the currency markets
during December. The currency suffered a sharp drop mid-month
following the EU summit and then collapsed dramatically towards the
end of the month as reports showed that the ECB's balance sheet
soared to a record EUR2.73 trillion after lending more money to
financial institutions earlier in the month. Investors sold euros
and consequently the currency fell to a 15-month low versus the US
dollar and fell below 100 yen for the first time since June 2001.
The Japanese yen traded in a small range versus the US dollar, but
saw a significant rally at month-end as the fall in the euro drove
investors into safe havens. The Chinese yuan increased
significantly against the US dollar, trading above 6.3 for the
first time in 18 years, with the central bank targeting currency
appreciation in order to prevent capital outflows. Commodity
currencies were volatile during the month, initially decreasing on
the back of risk aversion, but posting some gains later in the
month as rising oil prices encouraged demand. Managers generally
hold long US dollar positions versus the euro and emerging market
currencies. The US dollar will benefit from its safe haven status
amid global uncertainty and slowdown. They note that continued
sovereign debt concerns and the narrowing of the interest rate
differential between Europe and the US will weigh on the euro and
for this reason are shorting the currency. Additionally,
slowing emerging market growth and the increasing bias of
emerging market central banks to cut rates does not bode well for
their currencies. Certain managers also continue to short
currencies with a high beta to Europe, namely the Hungarian forint
and Polish zloty, versus the euro.
The sell-off in the natural resources sector continued in
December, with most commodities and commodity-related equities
posting losses. Commodities, as measured by the Dow Jones-UBS
Commodity Index, were down -3.7% while commodity-related equities,
as measured by the S&P North American Natural Resources Sector
Index, were down -4.6%. The energy sector moved lower in December.
WTI crude oil finished the year at $98.83/barrel. The price
decrease was largely the result of mounting concerns over the lack
of any comprehensive solution to the European sovereign debt
crisis. Energy prices fell as OPEC agreed to raise its production
ceiling. Natural gas prices were down nearly -16% for the month,
making it one of the worst performing commodities for the year, on
the back of elevated inventory levels. Precious metals prices were
also broadly lower in December. Gold prices fell over -10% during
the month, dropping below $1,600/oz. as a stronger US dollar curbed
demand for the metal. Agricultural commodity performance was
largely positive in December, with grains rallying and soft
commodities declining. The sector will remain volatile in the
near-term and so managers are trading tactically. They generally
hold long exposure to gold which stands to benefit from monetary
easing as well as lack of market conviction by policy makers. They
also hold long positions in oil in light of rising geopolitical
tensions.
Strategy Overview
Discretionary: -0.42%. Fixed income trading was generally
positive. In the UK, managers expressed their pessimism regarding
the growth outlook through long exposure to UK bonds, a move that
proved lucrative. Long positions in US 10-year treasuries and
German bunds also proved profitable. However, long exposure at the
front end of the European yield curve detracted marginally from
returns. Currencies generated mixed results, with the long US
dollar versus euro trade proving favourable and the long US dollar
versus certain commodity currency trades, such as Australian dollar
and Canadian dollar, proving costly. Exposure to equities generated
losses given the managers' short bias towards the sector.
Systematic: +1.14%. Results amongst trend-followers were varied,
with some managers registering gains from long fixed income
positioning, while others suffered losses from mid-month reversals
in stocks and in gold. Profits for the non-trend following managers
were widespread and resulted from long positions in fixed income,
namely US and German bonds, as well as long positions in the
Australian dollar and the Japanese yen.
Natural Resources: -4.25%.Losses from long exposure to oil and
gold more than offset any gains made by being long agricultural
commodities.
Relative Value Arbitrage: +0.92%.Gains were generated throughout
the month with positive contribution from both long and short
positions in equities.
Number of
Allocation Managers as
as of 30 December of Performance by
Strategy % 30 December Strategy %
-------------------------- ------------------- ------------- -----------------
December YTD
-------------------------- ------------------- ------------- --------- ------
Discretionary(1) 51 22 -0.42 -1.98
-------------------------- ------------------- ------------- --------- ------
Natural Resources 9 12 -4.25 -9.35
-------------------------- ------------------- ------------- --------- ------
Relative Value Arbitrage 5 3 +0.92 +1.14
-------------------------- ------------------- ------------- --------- ------
Systematic(1) 30 12 +1.14 +2.13
-------------------------- ------------------- ------------- --------- ------
Cash 5 - - -
-------------------------- ------------------- ------------- --------- ------
Total 100 48(1)
-------------------------- ------------------- ------------- --------- ------
(1) Discretionary and Systematic have one manager in common.
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/9484V_-2012-1-20.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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