The Trades According To Greed – China and Ukraine
Over coffee and chats on Viber, yes, I use Viber now because I can chat from my desktop using my phone number, I managed to glean a little of what is going through the minds of my investor friends and the trades they are itching to put on.
Topmost topic has been … China which has been garnering a lot of sympathy for their beaten down bonds and stock markets and greedy eyes are roving for bargains.
Not true, according to Zico. His premise is this. If Chinese banks are pricing 10 times P/E while tech stocks are pricing in about 45 times, would you buy the banks ?
There is a reason why the banks are down. But he would not be buying tech stocks if he had not made his 300% returns already because the next leg up is going to be harder and less profitable which I had not thought of, naturally.
Take a look at the break down of the SHCOMP index.
Zico’s healthcare and tech segments have outperformed against the index which is weighed down by the financials that comprise 33.66% of the index and industrials that take up the other 17%. Technology and healthcare are a mere 2.5% and 4.46% respectively. So if you had bought 2823 HK, what a disappointment it would have been with infuriating people like Zico, barely aware of where the index levels are because he only holds Tencent and China Medical.
High yield bonds ? Do you really want to be there just because some funds have the mandate to sell ? With the yield spikes and distressed pricings, there are vultures waiting to swoop with all eyes on Ukrainian bonds after the success story of Greek and Irish debt 2 years ago and lots of comparisons to Brady bonds even as IMF steps in to the rescue.
How much do we know about debt forgiveness which is starting to look like a trend for the future ? After partial write offs, the bonds are restructured, adjusted for notional changes and repackaged for a rally? (based on anecdotal evidence)
Ukrainian bonds are widely expected to deliver the same performance because they did follow the rules and overthrew the despotic pro Russian leader, so the West shall bail them out. But they are not part of EU, are they ? And with Putin ordering military exercises near Ukraine, analysts are urging the ultra high net worths to load it up because most of them missed out on Greece and Europe the last time. If anything, clients could be averaging down on the USD Ukrainian 10Y 7.5% 04/2023 now trading at 87 cts after an inspiring rebound back up from under 80cts just a fortnight ago – a neat 10% return. Nearly the same is observed for Turkish international bonds.
So there you have it, the greed trades that are moving in the markets now. Hitching a ride is a nice idea if you know what you are doing because catching bottoms is smelly business.