TIDMDTL
RNS Number : 7198X
Dexion Trading Limited
20 February 2012
Dexion Trading Limited ("the Company")
January Net Asset Value
The net asset value of the Company's Shares as of 31 January
2012 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
135.48 pence +1.20% +1.20%
-------------- ---------------- ----------------
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
In light of recent positive events, many managers have become
more constructive on their economic outlook; however, they continue
to be cautious on their view of the global economy. Economic data
in the US has been surprising on the upside and managers believe
that this positive momentum could prove self-sustaining, in
particular if the unemployment situation continues to improve and
consumer spending keeps rising. Furthermore, the Long Term
Refinancing Operation ("LTRO") taken by the ECB in December has
improved the liquidity situation in the European banking system and
considerably reduced systemic risks by precluding a short-term
funding crisis. Managers therefore believe that there is reason for
cautious optimism, particularly in the first quarter of 2012. Over
the long-term, however, they believe the US still faces challenges,
notably a still high, albeit declining, unemployment rate, as well
as political gridlock over key issues such as the extension of the
payroll tax break and unemployment benefits. In Europe, while the
LTRO measures provide a temporary reprieve for recovery, the
long-term problems are yet to be resolved. One of the dominant
concerns is that a recession is unfolding in the region and
austerity measures are contributing further to slowing growth. Some
managers note that negative developments in Europe could more than
neutralise good news from the US. The outlook for the UK also
remains poor with the economy weighed down by sluggish wage growth
and fiscal austerity. Within the emerging markets, the concern
revolves around European bank exposure to emerging markets, which
is substantial, and likely to contract as banks deleverage.
Managers believe that emerging market central banks will cast aside
inflationary concerns, which are already diminishing, and focus
instead on stimulating growth by cutting interest rates.
Market Overview
Risk assets enjoyed a strong start to the year due to a general
sense of optimism as positive US data overshadowed ongoing issues
in Europe. The month began with encouraging US employment figures,
including a drop in the unemployment rate to 8.5% versus 8.7% the
previous month. In addition, manufacturing PMI and construction
spending improved, while consumer credit increased by the biggest
monthly gain since November 2001. The three-year LTRO financing
provided by the ECB, as well as the Federal Reserve's statement
that they would keep rates low through to at least late 2014,
served to further fuel the rally in risk assets. However, risks in
Europe loomed as the debt crisis continued with S&P downgrading
nine sovereign credit ratings in Europe and the European Financial
Stability Facility's long-term rating.
Equity markets surged at the start of the year on the back of an
encouraging US payroll report. The rally stalled briefly mid-month
following the downgrade of many European sovereigns, but quickly
resumed following positive economic data, including
better-than-expected fourth quarter GDP in China, which supported
hopes of an economic soft-landing. Nearing month-end, the Federal
Reserve's dovish statement provided a further boost to stock
prices, but the rally diminished in the final trading days of the
month amid disappointing US fourth quarter GDP. The S&P 500
finished the month up 4.4%, the best start to the year since 1997.
European stocks slightly lagged US stocks, with the MSCI Europe
returning 3.3%, while emerging markets rose 7.3%. Exposure to the
sector remains tactical. In the US, managers are expressing the
country's relative outperformance through opportunistic long
positions in the S&P, while the emerging markets-focused
managers hold long positions in equities of those markets with
strong fundamentals, such as Korea, which they believe sold off
indiscriminately and too sharply in late 2011.
Despite the general "risk-on" mood in January, the bid for
government bonds remained intact. In the US, yields fell at
mid-month, but reversed quickly as macro sentiment improved
further. US Treasury yields, however, resumed their downward path
following the Federal Reserve's extension of its "lower for longer"
policy. Following the weakening of the equity rally towards the end
of the month, bond prices improved. UK Gilt and German Bund yields
followed a similar pattern. Funding rates in the European periphery
improved during the month with the exception of Portugal, where
five-year and ten-year bonds reached the highs experienced in the
euro-era as investors remained skeptical as to whether Portugal
would need another bailout or require a Greece-like debt
restructuring. The managers' bias in global government bonds will
remain long. Managers, especially those with a more pessimistic
view on Europe, hold long positions along the euro curve. Some
managers also hold long positions in UK government bonds, due to
slowing growth in that country, while others continue to express
the "lower for longer" theme through long positions in US
Treasuries as well as Mexican government bonds.
The strong US dollar trend that dominated much of the latter
half of 2011 reversed in January. For the first half of the month,
the euro weakened versus the US dollar as eurozone debt concerns
began to re-emerge following disappointing progress on the budget
deficit by the Spanish government. However, the euro reversed
course mid-month largely due to successful debt auctions in Spain,
France and Greece, which served to ease concerns in the region.
Commodity and emerging market currencies posted strong returns
during January, benefiting from the general risk-on environment, in
addition to rising commodity prices. Managers generally hold long
US dollar positions versus the euro and some emerging market
currencies. It is believed that the US dollar will benefit from a
safe haven status amid any global slowdown. The narrowing of the
interest rate differential between Europe and the US will weigh on
the euro and as such managers are shorting the currency. In
emerging markets they note that not all currencies are created
equal and tend to short currencies where emerging market central
banks are likely to cut rates in response to global growth
concerns. On the long side they favour currencies with a strong
positive carry, such as the Brazilian real.
The natural resources sector advanced in January, with
commodities and commodity-related equities registering significant
gains in an upbeat start to 2012 as sentiment improved during the
month. In the energy sector, Brent crude oil posted gains for the
month, largely the result of escalating geopolitical risk in Iran,
while WTI prices were slightly lower for the month. Natural gas
prices were down more than 16% for the month on the back of
exceedingly high inventories and revised forecasts showing milder
weather across much of the US through late January. Industrial and
precious metals prices were the outperformers in January, climbing
on the back of flexible monetary policies and a weakening US
dollar. Gold prices advanced almost 11%, while silver was the
top-performing commodity for the month. Precious metals-related
equities enjoyed a strong month, particularly the small-cap
companies. Agricultural commodity prices were mixed during what was
a volatile month of trading. Wheat, cotton and sugar prices all
finished marginally up on the month, largely the result of
weather-related problems in South America. Conversely, corn prices
fell as a result of a decidedly bearish USDA report, indicating
elevated corn production and an increase in harvested acreage. The
sector may remain volatile in the near-term and as such 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 on the part of policy makers. Managers also have
long positions in oil in light of the rising geopolitical tensions
as civil unrest and geopolitical risk throughout the Middle East
continues to increase, serving as a potential flashpoint for
sharply higher commodity prices.
Strategy Overview
Discretionary: +1.55%. Fixed income trading was generally
positive. In the UK, managers expressed their pessimism on a
declining growth outlook through long exposure to Gilts, a move
that proved lucrative. Being long 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 a positive performer and the long US dollar versus
certain commodity currency trades, such as Australian dollar and
Canadian dollar, proving costly. Equity exposures proved
detrimental given the managers' short bias towards the sector.
Systematic: +1.07%. Positive performance from non
trend-following managers offset losses among trend followers. Non
trend followers profited from long positions in the Canadian dollar
and Australian dollar as well as long positions in US and German
fixed income, which benefited from continued flexible monetary
policy. Among trend-following managers, losses resulted from short
positions in the euro and to a lesser extent short positions within
metals.
Natural Resources: +3.08%.Gains were generated through long
positions in gold and gold equities, while long positions in energy
also contributed positively to performance. Gains were slightly
offset by losses generated through long positions in corn and
wheat, as these commodities sold off sharply early in the
month.
Relative Value Arbitrage: +0.59%.Managers benefited from lower
equity correlations throughout the month, although returns were
muted in liquidity-focused strategies.
Number of
Allocation Managers as
as of 31 January of Performance by
Strategy % 31 January Strategy %
-------------------------- ------------------ ------------- -----------------
January YTD
-------------------------- ------------------ ------------- --------- ------
Discretionary(1) 51 22 +1.55 +1.55
-------------------------- ------------------ ------------- --------- ------
Natural Resources 9 11 +3.08 +3.08
-------------------------- ------------------ ------------- --------- ------
Relative Value Arbitrage 5 3 +0.59 +0.59
-------------------------- ------------------ ------------- --------- ------
Systematic(1) 30 12 +1.07 +1.07
-------------------------- ------------------ ------------- --------- ------
Cash 5 - - -
-------------------------- ------------------ ------------- --------- ------
Total 100 47(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/7198X_-2012-2-20.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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