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Wednesday, 17 November 2010

Emerging Markets ETF Put Trading Advances to Five-Month High in the U.S. - Bloomberg

Trading of bearish emerging-market stock options jumped to a five-month high in the U.S. yesterday as investors boosted buying of the contracts to protect against losses in the shares amid a global equity retreat.

More than 465,000 puts to sell shares of the iShares MSCI Emerging Markets exchange-traded fund changed hands, 3.6 times the four-week average and triple the number of calls to buy. The most-active contracts were December $44 puts, which rose 58 percent and accounted for a quarter of put trades. The ETF tracking 718 stocks in 22 developing nations fell the most in almost a month, losing 2.6 percent to $45.17 as of the close in New York. It hasn’t closed below $44 since Sept. 23.

“People are scrambling for hedges or rolling their protection lower,” said Alec Levine, a strategist at Wallachbeth Capital LLC in New York. “Everyone ran for the exits at the same time. When markets get defensive, emerging markets correct disproportionately.”

HERD MENTALITY | PRAGMATIC CAPITALISM


This past summer I filmed this video (below) in Germany in the Englischer Gartens where a flock of sheep were grazing. What was distinct was that the sheep were grazing entirely on one side of the road and the grass was wearing thin as they moved ever closer to the edge of the road. The grass was noticeably more green and plentiful on the other side, however, none of the sheep ventured over. Eventually, one sheep (for whatever reason) had the bright idea of crossing the road and moving into uncharted territory. Then a few more followed. Then more. And before I knew it the entire flock was surrounding me. Within minutes there were hundreds of sheep running across the road in unison to the other side.
It was fascinating to watch this herd mentality in real-time as it closely resembles what we often see in human behavior and specifically markets. The smart money makes a wise move, more investors follow, enthusiasm ensues, the public pours in, greed trumps fear and before you know it there is a severe disequilibrium and ultimately a collapse. What you don’t see in the video is the culmination. I had to move because I was quite literally afraid I was going to be trampled by sheep, but what happened seconds after this video ended was like a bubble bursting in a marketplace.
Apparently, the sheep weren’t supposed to venture across the road. Out of nowhere an Australian Sheep dog came running around from the side of the herd like a bolt of lightning and corralled the herd back into its rightful place. Sheer panic broke out (from yours truly as well as I thought a wolf was running after me) as the steady stream of sheep moving across the road turned into a mass rush for the exit as the entire flock quickly shuffled back onto the other side of the road. After a brief panic all was set right in the universe and equilibrium was restored….
You think we’re that different from sheep? Think again.
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Gulf Finance House to raise $500 million

Shareholders of Gulf Finance House (GFH), an investment bank in Bahrain, have approved a plan to raise up to $500 million to rescue the company from the brink of bankruptcy and finance a wholesale rethinking of its business model.

Despite objections from some investors, holders of about 32 per cent of GFH stock gave the nod to all items on the agenda at a pair of meetings on Sunday, according to a statement posted on the Bahrain Stock Exchange website.

Those included bringing in fresh funds through an Islamic financing instrument convertible into shares, as well as a reduction in capital and a four-to-one consolidation of shares."

IPIC's first bond is 4.4 times oversubscribed

Investors placed orders for US$11 billion (Dh40.39bn) of bonds sold this week by the International Petroleum Investment Company (IPIC), an Abu Dhabi Government-owned vehicle that holds some of the emirate's most high-profile foreign investments.

The $2.5bn bond, IPIC's first, was 4.4 times oversubscribed, the fund said in a statement yesterday.

'IPIC continues to establish new precedents for Abu Dhabi,' said Khadem al Qubaisi, the managing director of IPIC. 'It has always been an objective of IPIC to diversify our capital structure and partner with the international capital markets."

Clues that reveal Dubai's strategy for its assets

Mohammed al Shaibani is a man who deserves to be heard more often.

Yesterday, in an interview in the Financial Times, he gave the clearest indication yet of the strategy Dubai will employ to get through the long-term effects of the financial crisis, and raised the possibility of a privatisation programme of the emirate's most valuable assets.

As head of the Ruler's Court, he has direct access to the thinking of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.

FT.com / FT Trading Room - Abu Dhabi moves to secure food supply

Abu Dhabi is to make a bold foray into commodities with the establishment of a government-owned trading house aimed at securing food supplies for the import-dependent nation and capturing profit margins in metals and agriculture trading.

People familiar with the plans say the company, which is called Abu Dhabi Sources or ADS, is likely to be started with a capital base of several hundred millions of dollars.

ADS will be going up against well established trading houses, including Glencore, the world’s largest commodities trader, ­Minneapolis-based Cargill and Louis Dreyfus of France.