Forex News

Asia’s macro hedge funds get ready for end of yen weakness

2022.09.21 06:10

[ad_1]


© Reuters. FILE PHOTO: Coins and banknotes of Japanese yen are seen in this illustration picture taken June 16, 2022. REUTERS/Florence Lo/Illustration

By Summer Zhen

HONG KONG (Reuters) – Asia macro hedge fund managers, many of whom posted strong returns this year, are betting the Japanese yen’s unrelenting slide will end soon and some are even priming for a possible tumble in Japanese government bonds.

Veteran Japan investor Soon Hock Chua’s Asia Genesis Macro Fund closed its short position on yen recently after the short trade contributed about 3 percentage points of the gross return this year. The Singapore-based fund had a net return of 9.3% at the end of August.

“We had short positions in yen since January and closed them at slightly above the 140 level. We are neutral at the current level,” said Chua, the fund’s chief investment officer.

Chua founded Asia Genesis in 1999 and his Japan Macro Fund returned 18.7% annually between March 2000 and 2009. He relaunched the business in 2020 after taking a break.

“Japanese authorities rightly should be concerned about the very weak yen and may intervene,” Chua said, pointing to the jump in Japan’s inflation.

The growing divergence between the Bank of Japan’s ultra-dovish policy and the Federal Reserve’s super-hawkish one has driven the yen down 20% this year against the dollar. The Fed is widely expected to deliver another aggressive hike later on Wednesday, with the BOJ seen standing pat again on Thursday.

The BOJ’s zero-rates policy stance, even as Japan’s inflation has hit its fastest annual pace in nearly eight years, has speculators betting the central bank will eventually have to give up on the vast bond buying project that keeps 10-year yields pinned to zero.

“A change of monetary policy is long overdue,” said Shun Hong Liu, chief investment officer of Hong Kong-based Hong Investment Advisors. Its HCM Rapier Fund Class A generated a 55% net return through the end of August 2022.

Bucking the trend of many other funds, Liu has a long position on the yen at 130-per-dollar and believes a sharp appreciation of the yen could easily happen, like it did in 1998 and 2008.

It would not be a surprise if the Japanese politicians ask BOJ Governor Haruhiko Kuroda to discontinue the ceiling of 0.25% on 10-year JGBs and try to steer the economy away from trouble before his retirement, Liu said. Kuroda retires next year.

“We have conviction in our long yen position,” he said, adding that the positions so far haven’t affected performance too much as they use the long positions as a hedge on their other short Asian currency trades.

Chua and Liu also warn that JGBs are a bubble that may burst soon, as Japan’s monetary stimulus had merely stoked inflation, instead of generating sustainable economic growth.

“Japan will see the bursting of JGB bubble that it desperately wants to preserve,” Chua said. “If the yen weakens further and CPI inflation escalates above 3% for a sustained period, this may be coming.”

Nevertheless, betting against Japanese sovereign debt– a trade famously known as a widow-maker — has never been easy, given the BOJ’s massive balance sheet and steely resolve to defend its yield curve control settings.

Asia Genesis Macro Fund’s short trades on JGBs were closed out with a 1.2% gross loss this year.

“The ’widow’ trade remains challenging as Kuroda’s BOJ remains steadfast,” Chua said.

(This story refiles to correct order of surname and given name in second paragraph)

[ad_2]

Source link

Related Articles

Leave a Reply

Back to top button
glacier-network
Glacier Network (GLS) $ 0.00063 11.11%
flavia-is-online
Flavia Is Online (FLAVIA) $ 0.000075 5.95%
nova-tether-usd
Nova Merged USDT (zkLink) (USDT) $ 1.00 0.11%
mao-2
Mao (MAO) $ 0.000074 1.61%
kakaxa
Kakaxa (KAKAXA) $ 0.000746 7.13%
prick
Prick (PRICK) $ 0.000074 6.88%
fomoon
FoMoon (FOMOON) $ 0.000075 0.00%
wrapped-eth-defiverse
Wrapped ETH (DeFiVerse) (WETH) $ 2,253.01 9.99%
beratardio
BERATARDIO (BERATARDIO) $ 0.000074 4.05%
borpatoken
GorplesCoin (GORPLES) $ 0.00015 3.93%
santa-2
SANTA (SANTA) $ 0.000074 8.62%
cuminu
Cuminu (CUMINU) $ 0.000008 0.00%
righteousretail
RighteousRetail ($RRT) $ 0.000088 0.00%
lucy-ai
Lucy AI (LUCY) $ 0.000074 5.91%
lets-get-this-bread
Lets Get This Bread (LGTB) $ 0.000007 3.38%
sam-2
SAM (SAM) $ 0.003667 1.40%
playnity
PlayNity (PLY) $ 0.000782 0.00%
mev-capital-usual-boosted-usdc-morpho-vault
MEV Capital Usual Boosted USDC Morpho Vault (USUALUSDC+) $ 1.08 0.01%
inusol
INU (INU) $ 0.000073 15.83%
plume-usd
Plume USD (PUSD) $ 1.00 0.00%
ccop
cCOP (CCOP) $ 0.00024 2.33%
citadel-one
Citadel.one (XCT) $ 0.000488 0.37%
rich
Rich (RCH) $ 0.000175 0.00%
nftbooks
NFTBooks (NFTBS) $ 0.00000000120632 1.46%
pulsr-2
PULSR ($PULSR) $ 0.000073 6.24%
real-mxn
Real MXN (MXNE) $ 0.051031 0.10%
larissa-blockchain
Larissa Blockchain (LRS) $ 0.005646 1.57%
booty-2
Booty ($BOOTY) $ 0.000001 26.97%
helping-hearts-international
Helping Hearts International (HHI) $ 0.007268 39.82%
woke-chain
Woke Chain (GOWOKE) $ 0.000088 5.46%
goatx
GOATX (GOATX) $ 0.00000003822324 17.59%
nasdao-ai
Nasdao Ai (NDAO) $ 0.000066 2.52%
wepower
WePower (WPR) $ 0.000118 0.00%
nezha
NEZHA (NEZHA) $ 0.000072 9.96%
trivian
Trivians (TRIVIA) $ 0.000117 8.32%
madonna-del-gatto
Madonna del gatto (GATTO) $ 0.000072 0.00%
leverj-gluon
Leverj Gluon (L2) $ 0.000327 42.54%
babypoes
BabyPOES (BABYPOES) $ 0.000074 0.02%
armor
ARMOR (ARMOR) $ 0.000302 3.82%
creaticles
Creaticles (CRE8) $ 0.000527 0.27%
cryptoblades
CryptoBlades (SKILL) $ 0.072102 2.36%
kekius-maximus-3
Kekius Maximus (KEKIUS) $ 0.000072 4.45%
kapsa
Kapsa (KAPSA) $ 0.000003 0.00%
popsmile
Popsmile (POPSMILE) $ 0.000072 2.39%
defi-yield-protocol
Dypius [OLD] (DYP) $ 0.004582 8.95%
metatrace
MetaTrace (TRC) $ 0.000201 1.08%
soley
Soley (SOLEY) $ 0.000072 6.44%
furfication
Furfication (FUR) $ 0.000071 2.98%
bladeswap
BladeSwap (BLADE) $ 0.001011 12.38%
coin6900
Coin6900 (COIN) $ 0.000073 44.93%