Sometimes it pays to take a step back from looking at the trees to see the forest. Indeed, most people will know of the explosion in Social Media & also the dizzy rise in the stocks of the lucky listed firms in this sector. But few will be aware that Biotechnology sector stocks have even surpassed the explosive rally in both Social Media & Internet related stocks since beginning of 2012.
The above chart clearly illustrates what happened in the last two & a half years using IBB (Biotech ETF), FDN (Internet ETF) & SOCL (Social Media ETF). Now, all 3 sector ETFs have suffered corrective move lower from March 2014 all time highs of around -16% for IBB, -19% for FDN & -28% for SOCL. S&P500 (SPX) & Nasdaq100 (NDX) only suffered a -1.5% & -5% drop from March 2014 highs respectively.
Some commentators & analysts out there think that there are nuggets to be found in the Biotech carnage http://www.forbes.com/sites/kenkam/2014/04/18/opportunities-among-the-rubble-of-the-biotech-selloff/ . However, Asianmacro think that unless you are very familiar with the precise potential new ‘wonder drug’ or ‘cure all treatment’ that is in the pipeline of some of these Biotech companies; more often than not, it is like prospectors trying to make it big in drilling for oil or finding the next new gold vein in the ground. Who dares win!
However, Social Media might be more interesting now given the deeper correction & some of the names in the ETF & sector like Tencent, LinkedIn, Sina Corp/China & Google continue to deliver in their businesses & earnings. In fact, Asianmacro recommended a buy recently in Tencent on 6 May 2014 http://asianmacro.com/2014/05/06/where-to-on-social-media-facebook-10-cents-or-rakuten/ .
OK time to hit the ‘LIKE’ button or perhaps the ‘BUY’ button as well !
Illustration 1: If CNY trading band is widened .. be careful what you wish for as CNY weakened previously!
Rumour #1: Heading into the G20 Finance Ministers meeting this weekend, the first rumour is that China will probably widen the yuan’s trading band within the next three days after central bank Deputy Governor Yi Gang signaled policy makers will loosen control over the currency. China is always astute in playing its cards leading to any G20 Finance Ministers meeting to avoid being labelled as a currency manipulator and be in everybody’s good books. Asianmacro think this is possible but do be mindful that it can also mean two-way volatility where CNY can also depreciate and not just appreciate in a straight line.
Rumour #2: There is report that MSCI has had a meeting with China SAFE & CSRC in allowing China A-shares to be included in MSCI EM index. With the recent CNY appreciation trend, the talk about pushing back RQFII approval process, the fully deregulation of QFII mechanism and the opening of capital account would still be a medium term event if not a long term occurrence. The source of the rumour can be attributed to this article http://finance.sina.com.cn/stock/yjdt/20130418/213915196798.shtml. It is funny how rumours always starts on Friday and spread like wild-fire by brokers who work their phones tirelessly starting with the calls to their top clients and working down the list. Do note that brokers are not necessarily there to ”warn” you of things but their incentive is to get you to do something and execute / trade more so that volumes are churned and they earn their commission dollars! Asianmacro think this rumour is long in the tooth and probably not today or any more likely in the near future ….
SHCOMP rallied and spike up higher on these rumours and dragged everything else along. I will not be a buyer of these rumours especially #2 …. and will use any stupid spike up in risky assets to sell them short!
P.S. Will be looking at good levels to short CNY NDF and also add to DAX and SPX and AS51 shorts on rally due to the China rumours and feel good.
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.