A Japanese Exporters market-neutral basket was proposed in November 2013 in order to benefit from weakening JPY moves while hedging from the extreme beta upheavals seen in Japanese equities during 2013. The results so far have been flawless with the whole basket outperforming the short Topix position (ETF short was more effective) as displayed right below: When updating our quantamental scoring tool, Chiyoda Corp has been left out on valuation grounds due to its recent significant rally (+30% in two months on new US NG contracts gain). No other candidates have been found by the tool to replace Chiyoda, for which reason the whole market-neutral basket will be played with the remaining 3 names: Isuzu, Bridgestone and Fujitsu General. The three-panel chart below point out a very bleak scenario for Abenomics ambitions:
Therefore, there is still upside as USDJPY FX cross may soar above 110 and boost business confidence even more in 2014 at the expense of higher imported inflation and more trouble for Japan’s consumers. A market-neutral basket continues to be the best way to play this FX trend. Disclaimer: the blog is intended to convey investment ideas and, market views , yet they are not a solicitation or recommendation to buy/sell/hold securities but merely investment ideas that should NEVER serve as the basis of the reader trading decisions. This website and its reports are for general information purposes and any investment decision should be discussed with a financial adviser before taking place. The investment ideas displayed here could have been implemented at an earlier date than the one stated at the blog's post date; for which reason the latter dates do not represent accurate and timely entry/exit points in order to protect those investors with whom the blog author has a fiduciary agreement.
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Carlos Salas
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