TIDMDTL
RNS Number : 5172K
Dexion Trading Limited
15 July 2011
Dexion Trading Limited ("the Company")
June Net Asset Value
The net asset value of the Company's Shares as of 30 June 2011
is as follows:-
GBP Shares
NAV MTD Performance YTD Performance
-------------- ---------------- ----------------
135.87 pence -1.42% -1.67%
-------------- ---------------- ----------------
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 ("Permal Macro") Class A
shares provided by Permal Macro. The Investment Adviser and third
party service providers to Permal Macro, rely on estimates of the
value of Underlying Funds in which Permal Macro 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 Permal Macro 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 Permal Macro
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 Permal Macro'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
Managers continue to be optimistic regarding the prospects for
global economic growth. This follows more positive global economic
developments and macroeconomic data, including the resolution of
Greek fiscal issues in Europe (for the time being, at least),
positive US manufacturing numbers and strong Japan industrial
production data. These news items contribute towards the belief
that there may be a rally in economic activity in the third
quarter. In addition, managers still expect emerging markets to
successfully engineer a soft landing. Accordingly, many have added
to their risk-on positioning although they remain cognisant that
markets will experience periods of high volatility and consequently
their general level of risk taking remains limited.
Market Overview
Sovereign debt issues in Greece and other peripheral European
countries, along with slow global economic growth, dominated the
equity markets in June. The month began with the release of the US
employment report which showed that the employment market added
significantly fewer jobs than had been expected, thus causing the
unemployment rate to increase to +9.1%. A sharp decline in the ISM
Index added to growing concerns regarding the magnitude of the
economic deceleration. The imminent end of QE2 and the looming US
debt limit issue also contributed to the increased levels of risk
aversion. Economic data was also weak outside of the US, with
decreasing industrial output from Germany and the UK, as well as
declining exports to China. Throughout most of the month, European
policymakers failed to reach an agreement on how to handle the
continuing debt crisis in Greece. However, risk appetite increased
towards the end of the month as Greece's parliament passed key
bills that opened the way for the next tranche of bailout
funding.
Equities sold off throughout most of June in response to the
persistent problems in Europe and weak US economic data. In the US,
the majority of the decline came early in month on the back of the
weak employment market reports, while global equities similarly
trended lower. Stocks, however, did pick up towards the end of the
month following the proposed solution to Greece's problems. This
month end rally was further supported by surprisingly positive US
industrial data. Managers expect the equities market to be highly
volatile over the course of the next few months, caused by
risk-on/risk-off flows, and are therefore not holding large
positions within equities. While ample global liquidity is likely
to lend continued support to the sector, the uncertain economic
outlook and political picture is likely prove to be detrimental.
Over the long-term, managers are generally more bullish given high
yields, low dividend payout ratios and significant corporate cash
stockpiles.
Global bond yields declined for most of June before rising
sharply at the end of the month. Investors sought safety in US
fixed income amid concerns over the US economy despite deadlocked
negotiations over the US debt limit. The rise in prices was stifled
briefly mid-month on the back of better-than-expected US retail
sales and Chinese industrial production figures, but ultimately the
risk-off theme prevailed for much of the remainder of the month.
However, yields rose dramatically in the final week of the month
driven by the Greek solution and poor US Treasury auctions, which
coincided with the end of QE2. UK and German 10-year bonds followed
a similar pattern, while yields on peripheral bonds continued to
widen slowly through the month due to the Greek concerns and
warnings of further downgrades of Italian credit. Many managers
believe that long positions in the US fixed income market are
beneficial in the medium-term based on the view that growth is weak
and rates will remain low. As such, they continue to express the
"lower for longer" theme at the front end of the yield curve.
However, others have initiated some small short positions as they
acknowledge that bonds may experience some weakness in the
short-term as QE2 draws to a close and US policy makers struggle to
reach a compromise over the debt limit. In Europe, managers are
holding long positions in German bunds as there has been a slowdown
in economic activity. In emerging markets, managers hold long
positions in those countries, such as Mexico, where inflation is
controlled.
Currencies fluctuated within narrow trading ranges throughout
the month driven primarily by risk reduction flows. The Euro ended
the month higher versus the US Dollar, which declined following
weak economic data and the uncertainty surrounding the debt issue
in Greece. Sterling steadily declined versus both the US Dollar and
the Euro, due to a dovish stance from the Bank of England and signs
of deteriorating economic growth. The Japanese Yen and Swiss Franc
strengthened in the first part of the month on safe haven flows,
but most of the gains were offset towards the end of the month as
risk taking resumed. Conversely, emerging market currencies traded
lower versus the US Dollar but rallied sharply at the very end of
the month. Managers remain bearish on the US Dollar due to the low
rates, fiscal uncertainty and subdued growth. They are however
bullish on emerging market currencies that need to appreciate to
combat inflationary pressures. Views on the Euro continue to vary,
with some managers believing that the political will to solve
periphery fiscal issues and the European Central Bank's wish for
increased rates, will support the currency. Others, however,
believe that the ongoing debt concerns at the periphery will impact
on the Euro.
The natural resources sector experienced difficulties in June
due to a variety of macroeconomic challenges, including continued
monetary tightening in China, concerns surrounding Greece's fiscal
situation, the end of QE2 in the US and the ongoing debt ceiling
debate. The energy sector was one of the worst performers, with
crude oil prices falling -7.1% due largely to the unexpected
month-end announcement by the IEA to release 60 million barrels of
crude oil on to the market to suppress recent price increases. Base
metals returned mixed results, with losses experienced at the
beginning of the month, due to concerns surrounding global demand.
However, the sector rebounded at the end of the month in response
to positive economic data out of the US and more positive signs on
Greece. The precious metals sector, usually a safe haven amidst
investor uncertainty, also declined during the month following
profit taking amongst investors. Agricultural commodities were hard
hit, as a month-end USDA crop report highlighted a supply situation
that was not as bad as most market participants had feared. This
resulted in a significant sell-off, with the majority of losses
occurring on the last day of the month. Managers expect continued
volatility within the commodities sector over the near-term given
the uncertainty currently surrounding the European debt crisis, the
growth slowdown in China and the US deficit debate. However, recent
price weakness across much of the commodity sector is creating
potentially attractive entry points, especially given the
attractive long-term supply/demand fundamentals of numerous
commodities.
Strategy Overview
Discretionary: -1.00%. Managers experienced losses in the
foreign exchange sector stemming from short US Dollar positioning
versus emerging market currencies. This has been a long-held
position for many managers and several managers increased exposure
at the beginning of the month as they felt valuations had reached
even more compelling levels. However, the US Dollar rallied in June
on growing risk aversion and the end of QE2. Long exposure to
equities, particularly US equity indices, also proved detrimental.
After a sharp mid-month sell-off in the sector, many managers
reduced their exposure and, as a result, did not capitalise on the
subsequent rally that occurred towards the end of June. Losses also
derived from long positions in precious metals and across the
energy sector, which was hit particularly hard by the IEA's
decision to release crude oil into the market (see Market Overview
above).
Systematic: -1.94%. Trend followers suffered in light of the
pronounced market reversals that occurred at the end of the month.
Exposure to equities proved detrimental to performance as managers
were generally long going into the month, with several managers
reversing exposures towards month end then being impacted on the
short side when equity markets suddenly rallied. Long exposure to
the energy sector also proved detrimental. On the non-trend
following side, returns were primarily driven by currency markets,
with significant losses coming from long Sterling positions and
short Swiss Franc positions; gains, on the other hand, derived from
long Australian Dollar positions, which appreciated significantly
in the last week of the month. Short positions in crude oil also
benefited non-trend following managers.
Natural Resources: -2.80%.The sharp depreciation in commodity
prices continued to impact the Portfolio's commodity managers. Long
positions in commodities as well as in natural resource-related
equities resulted in losses.
Relative Value Arbitrage: +0.65%.Statistical arbitrage managers
posted positive returns with particularly strong performance from
the long side of the portfolios in the latter part of the
month.
Allocation Number of
as of 30 June Managers as Performance by
Strategy % of 30 June Strategy %
-------------------------- --------------- ------------- -----------------
June YTD
-------------------------- --------------- ------------- -------- -------
Discretionary-- 50 22 -1.00 -0.58
-------------------------- --------------- ------------- -------- -------
Natural Resources 11 13 -2.80 -0.62
-------------------------- --------------- ------------- -------- -------
Relative Value Arbitrage 5 3 0.65 4.27
-------------------------- --------------- ------------- -------- -------
Systematic-- 28 12 -1.94 -2.02
-------------------------- --------------- ------------- -------- -------
Cash 6 - - -
-------------------------- --------------- ------------- -------- -------
Total 100 49(1)
-------------------------- --------------- ------------- -------- -------
(1) Discretionary and Systematic have one manager in common.
Strategy returns are in US$ and net of underlying manager fees
only, and not inclusive of Dexion Trading's fees and expenses.
Voting Rights and Capital
The Company's share capital consists of 99,340,049 GBP shares
with voting rights. This figure may be used by shareholders as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change to their
interest in the Company under the FSA's Disclosure and Transparency
Rules.
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/5172K_-2011-7-15.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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