TIDMDTL
RNS Number : 0874T
Dexion Trading Limited
14 November 2013
Dexion Trading Limited (the "Company")
October Net Asset Value
The net asset value of the Company's Shares as of 31 October
2013 is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
136.57 pence +0.39% +1.09%
-------------- ---------------- ----------------
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
While the economic situation in the US continues to improve, it
is no longer the robust growth engine it was at the start of the
year. The housing and banking sectors are in far better shape than
they were a few years ago, but there remain a number of headwinds,
including continued concerns over tapering, increasing regulation
and poor domestic policies. In Europe, concerns certainly remain,
including the required deleveraging in the banking sector. However,
what appears to be a nascent recovery, with a pick-up in business
activity (even if at the periphery), are encouraging signs that the
worst may be behind us. Signs of economic progress in Japan are
also encouraging, but the implementation of "Abenomics" has been
rather slow and drawn-out. On a positive note, the Bank of Japan
will have to embark on a very aggressive monetary stance in 2014 -
or possibly earlier - to offset the effects of the consumption tax
hike set to take place in April. Such a move should give renewed
momentum to the "Japan trade". In light of the uncertainty
surrounding the timing of Fed tapering, managers have adopted a
tactical trading stance. While their conviction in longer-term
themes remains strong and the opportunity set continues to be rich,
it pays to trade in an active manner.
Market Overview
US-related developments drove markets in October, in particular
the 16-day government shutdown and subsequent deal to fund the
government until mid-January, while lifting the debt ceiling until
February. After a rocky start to the month, risk assets rallied in
October as sentiment improved following the end of the shutdown and
the Fed's decision to maintain the pace of quantitative easing.
Global growth showed some resilience during the month with UK GDP
in Q3 expanding and emerging markets growth data surprising to the
upside, while data in the US and Europe was slightly more
sluggish.
Global equity markets advanced in October, driven by the
positive US-related developments, healthier global economic data,
strong corporate earnings and continued monetary stimulus. In the
US, equity markets initially moved lower on the US government
shutdown and continued political wrangling over the US debt
ceiling. Mid-month, equity markets rallied strongly when the US
government reached its last-minute agreement to end the shutdown
and avoid the debt default. US equity markets rose further later in
the month as Fed policymakers indicated that they would press ahead
with the current rate of stimulus. In Europe, equity markets
climbed on better-than-expected corporate earnings and optimism
that Europe is on a path to economic recovery, with upbeat eurozone
manufacturing data and Spain's Q3 GDP data indicating the country
has exited its two-year recession. In Asia, Japanese equity markets
declined slightly on concerns that a higher sales tax would curb
growth and speculation on the direction of the US stimulus. Despite
higher GDP and PMI figures, Chinese equity markets moved lower.
While the Fed's continued accommodative policy has created a
favourable backdrop for risk assets, managers are generally still
holding long equity exposures, although certain managers have
become more cautious on the US market in which they fear equities
may have rallied too hard and fast. In their view, the market has
yet to come to the reality that this surge in stocks has come on
the back of rather muted growth. Therefore, managers are
increasingly favouring Japanese over US equities and have in
certain cases gone long Japanese indices while shorting their US
counterparts. They also have long exposure to European equities
based on improving growth prospects.
The JP Morgan Global Government Bond Index (local currency) was
up 0.8% in October. The yield on 10-year US treasuries ended the
month down 8 basis points at 2.5%; having initially risen on
concerns over the US debt ceiling impasse, it then fell sharply in
the latter half of the month on speculation that the Fed would
delay tapering until 2014. European yields likewise declined as the
European economic outlook improved, with lower-than-expected
inflation fueling speculation that the ECB may cut interest rates
further. The Merrill Lynch High Yield Master II Index (a high yield
bond index) was up 2.5% in October, while the JP Morgan EMBI+ Index
(emerging market debt) was up 2.7%. In the US, having seen many
managers establish long duration positions along the curve
following the Fed's "no tapering" announcement in September,
certain managers are now reverting to tactically shorting US rates.
They believe that as US 10-year treasury rates head towards 2.5%,
they start to present a compelling short opportunity as any further
declines in inflation will be limited and growth in the US, while
soft, is resilient enough to make the case for higher yields. In
addition, the Fed is still the first of the major developed market
central banks to announce plans to reverse accommodative policy,
although when this will take place is not yet known. Managers also
note that interest rate volatility in the US is at a low and
presents an attractive opportunity from the long side. In Europe,
the bias is to maintain long exposure along the curve as, despite
the recent improvements and pick-up in activity, the eurozone
remains in a fragile position, with the banking sector specifically
still needing to go through further deleveraging. Elsewhere in
Europe, managers are tactically long select peripheral bonds in
countries where signs of a recovery are burgeoning and, in
particular, Greece.
The US dollar performance was mixed against developed market
counterparts in October, rising against the Japanese yen, Canadian
dollar and sterling, and declining against the euro, Swiss franc
and Australian dollar. The euro reached a two-year high against the
US dollar during the month before the gains were tempered into
month-end on news of an unexpected decrease in eurozone inflation.
The Australian dollar was buoyed by a less dovish RBA statement,
while the Canadian dollar fell sharply after the Bank of Canada
Governor Poloz commented that there was a higher risk of inflation
lagging the 2% target. Emerging market currencies generally rose on
the back of increased risk appetite, buoyed by the likelihood that
the Fed would not start tapering until at least 2014. On the whole,
managers have neutralised and in some cases adopted short exposures
to the US dollar. Early in the year, the currency was well
supported by strong US growth, but the US recovery has not been as
broad as initially expected in 2013. In Europe, on the other hand,
positive growth momentum is picking up. However, some managers note
that Europe's still precarious situation does not bode well for the
currency. As such, managers are tactically trading the euro from
both the long and short sides. Over the longer term, however, the
view remains one of US dollar strength. The favoured funding
currency of choice remains the Japanese yen, although the
implementation process of "Abenomics" has been rather slow and
arduous. The indisputable fact is that these policies are being
implemented and therefore the trade has room to run.
In commodities, WTI crude oil prices decreased as a result of
increasing US stockpiles. Natural gas prices rose to a five-month
high following colder US weather in mid-October, then reverted
lower on news of larger-than-expected inventories and improving
weather. Gold prices finished essentially flat. Base metals prices
generally finished higher with the exception of copper, which moved
marginally lower on elevated inventories and news of tightening
Chinese credit markets. Agricultural commodity prices generally
moved lower on abundant harvests and the more favourable weather
conditions. However, sugar prices climbed as delays in the
Brazilian harvest fueled supply concerns. Whilst light, exposure is
generally expressed through short gold and long energy
positions.
Strategy Overview
Discretionary: +0.46%. In October, managers benefited from their
long positioning in global, particularly developed market, stock
indices. In addition, they registered gains from long exposures to
specific sub-sectors, such as UK housing. In fixed income, managers
profited from long exposures in Europe, namely the front-end of the
euro curve, but also certain peripheral bonds, such as Italian and
Greek. To a lesser extent, gains were also made from being long US
treasuries. These gains more than offset losses from the currency
sector, primarily from increased long exposure to the euro towards
month-end.
Systematic: +1.61%. Trend followers rebounded in October with
the majority of gains coming from the continued run-up in equity
prices. Managers also benefited from long bond positions. Returns
were more mixed on the non-trend following side. Gains came from
short positions in the Canadian dollar and the New Zealand dollar,
as well as long positions in US and European government bonds.
Gains were only marginally offset by short equity positions.
Natural resources: -0.71%. Gains in agricultural commodities,
notably from short positions in wheat and corn, were more than
offset by losses from gold exposures, both bullion and equities,
and long WTI crude oil.
Relative value arbitrage: +0.83%. Managers experienced good
gains in long positions, more than offsetting minor losses on the
short side.
Strategy Allocation Number of Performance by
as of 31 October managers as strategy %
% of
31 October
-------------------------- ------------------ ------------- -----------------
October YTD
-------------------------- ------------------ ------------- --------- ------
Discretionary(1) 64 20 +0.46 +7.57
-------------------------- ------------------ ------------- --------- ------
Natural resources 5 9 -0.71 -9.58
-------------------------- ------------------ ------------- --------- ------
Relative value arbitrage 8 3 +0.83 +9.22
-------------------------- ------------------ ------------- --------- ------
Systematic(1) 18 8 +1.61 -7.08
-------------------------- ------------------ ------------- --------- ------
Cash 5 - - -
-------------------------- ------------------ ------------- --------- ------
Total 100 39(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/0874T_-2013-11-14.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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