MAXIN GLOBAL FUND - USD is a Long / Short Directional hedge Fund incorporated in Luxembourg. It started trading on February,22 2022 and replaces MAXIN ADVISORS' MODEL PORTFOLIO which has been trading since January 1st 2014. At MAXIN ADVISORS, we manage FULLY TRANSPARENTLY and publish the transactions on a DAILY basis and the details of the portfolio on a WEEKLY basis.
Loss of Momentum
Our bear market rally is losing momentum together with the US technology sector which was the engine of the rise in the past few weeks.
US economic data released today and yesterday confirmed an easing of inflationary pressure with the PPI and import prices coming in lower than expected, while retail sales surprised on the upside, confirming the strength of US consumer’s appetite.
Since its October 13th low at 4591, the SP500 rose by 15 % and the European Eurostoxx 50 by 20 %, improving by that much general financial conditions, a feature that may not please a Fed and an ECB that are still fighting elevated inflation.
As we expected, the market narrative has espoused the thesis that Central bank will soften the pace of rate hikes in the near future and US bond yields are now trading at 3.71 %, a full 60 basis points decline from the 4.32 % peak reached on October 21st, again, and only 20 basis pints away form our ultimate target of 3.50 for this phase, adding to a much more supportive liquidity environment.
But the monetary tightening is far from over and short term rates have much further to go.
Goldman Sachs justs raised its peak Fed funds target to 5 / 5.25 % today, our long-stated levels for the end of the tightening cycle.
Equity investors have become more bullish but we have more and more SELL signals developing, particularly in Europe and many sectors in the US while we see individual technology stock peaking for now.
China’s spectacular equity rally is also losing momentum and is due for a breather.
As we did over the past few days, we have been taking profits on our long positions and increased our shorts, decreasing substantially risk and exposure in our portfolio.
In China, we took significant profits in ALI HEALTH, GUANGSHEN RAILWAYS, CHINA MErCHANT BANK, BILIBILI, SINOPEC, ANTA SPORTS, BAOZUN, SINOTRUCK, GEELY, XIAOMI, VIVA BIOTECH, CHINA PORTS, JD.COM, TENCENT MUSIC following its excellent results and even our recent positions in brokerage houses. We closed our position in real estate developer COUNTRY GARDENS and our exposure to China is now down to 82 % of the portfolio.
We also took our profits on our Emerging Markets and Emerging internet ETFs, closing our positions there.
In Europe, we closed ANTAFAGASTA at a substantial profit, re-instated our SHORT position in NERLIN PROPERTIES of Spain and added a new Short future position on the French CAC 40.
But we were extremely active in the US as well.
We took profits and closed our remaining long positions in GOOGL, AAPL, and MICROSOFT as well as in our Technology sector SPDR XLE. We added new short positions in CAT, BAC and MRK where we have strong SELL signals after their sharp rise of the past month. The rolling over of these mainline industrial and finical stocks is not a good sign for the short term of the main indexes.
As a consequence, we increased our long exposure to Volatility through the VIXL ETF.
We also increased marginally our short position in ETHER Futures as the collapse of FTX is sending ripples across the entire crypto space, with new exchanges halting withdrawals and stopping to lend against tokens.
We we also stopped out of our long position in Platinum at a profit, taking us entirely out of the commodity and previous metals space for now.
The sharp decline in the US Dollar is also giving signs of ending and the entire environment may be turning soon. The SP500 reached our initial target of 4’000 and failed to push through towards our ultimate target of 4’150. This is not to say that the bear market rally is over, but we have a significant loss of momentum that justifies our profit taking and re-building of our short positions.
Our portfolio is now only 35 % net long equities, being net short the US and Europe and net long China.
Xi Jing Ping is developing an intense activity internationally and the G20 meeting with Joe BIDEN and other leaders is a turning point in the antagonisation of China. He will also be meting with Japan’s prime minister for the first time and three years and the normalisation process is in full swing. We expect Chinese equities to pull back somewhat but the bull market is very much in place.
Now that the secular bottom and relief rally have been made, we shall be trading the long side of our Chinese portfolio actively, as we traded actively the short side of our US and European portfolios.
Unfortunately, volatility is here to stay and only active management can deliver alpha in the current wild swings of the markets.