/ 15 June 2010

Big win for long bets last week

“Sometimes it’s better to be lucky than good,” is an old saying from a trader buddy of mine. And that was certainly the case last week when we decided to swim upstream and bet against the doom-mongers by adding to our long positions.

We were nicely rewarded when the All Share bounced 5,4% over the last five days. Some counters where we had long positions, like MTN, rallied nearly 10%.

In this type of trading environment, with market sentiment turning on a sixpence, you have to bank profits quickly, and we closed out everything in the auction on Monday night.

It might have been a little bit premature as there is some nice corporate action in London this morning, with Rupert Murdoch’s News Corp putting in a cheeky bid for British Sky Broadcasting. We could be watching the first results of a strong US dollar and a weak pound. Watch this space, markets love corporate plays; it means risk appetite is back.

Even though some economic data that was released last week missed expectations, (US retail sales in particular), the market still managed to close firmer on Friday and the overall sentiment appears to be more positive. When bad numbers come out and the market still runs up, the shorts need to get out the way.

The market was given a much-needed boost by some Chinese export numbers, which showed that they rose 48% year-on-year and all the mess that is hitting the Eurozone seems to have been avoided by the Chinese. That extraordinary growth engine is still right on track. The numbers were initially leaked on Wednesday, and were so good that most people didn’t believe them.

That should still provide a bit of support for the market for the time being, although significant headwinds still remain.

We were reminded of that when Moody’s cut Greece’s credit rating to Junk status. Although tell us something we don’t know! So it looks like we are back to watching Greek yields again as opposed to the football. Hate my job sometimes.

For the first time in a while there doesn’t seem to be any high conviction trades after crunching the number son Tuesday morning, and with a South African public holiday on Wednesday and the start of the school holidays, I think we will just sit on cash for the time being. Short and sweet, but hopefully back to business next week.

  • Nick Kunze is head of dealing for BJM Private Client Services
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