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Asia’s macro hedge funds get ready for end of yen weakness | WKZO | Everything Kalamazoo

Summer Jen

HONG KONG (Reuters) – Asian macro hedge fund managers, many of whom posted strong returns this year, are betting the Japanese yen’s relentless decline will end soon, with some falling in Japanese government bonds prepared for the possibility of

Veteran Japanese investor Chua Soon Hok’s Asia Genesis Macro Fund recently closed after a short yen position contributed about 3% of its gross returns this year. The Singapore-based fund’s net profit margin at the end of August was his 9.3%.

“Since January, we have had a short Yen position that closed just above the 140 level. It is neutral at current levels,” said Chua, the fund’s chief investment officer.

Chua founded Asia Genesis in 1999 and his Japan Macro Fund delivered an annual return of 18.7% between March 2000 and 2009.

“The Japanese authorities are right to be concerned about a very weak yen and may intervene,” Chua said, pointing to a sharp rise in Japan’s inflation rate.

The yen has fallen 20% against the dollar this year as the divergence between the Bank of Japan’s ultra-dovish policy and the Federal Reserve’s ultra-hawkish policy has widened. The Federal Reserve (Fed) is widely expected to deliver another aggressive rate hike later on Wednesday, and the Bank of Japan will be seen back on its feet on Thursday.

The Bank of Japan’s zero interest rate policy stance means that even as Japan’s inflation rate hits its highest annual pace in almost eight years, speculators are skeptical that the BOJ will continue to peg its 10-year yields at zero on a large government bond. I’m betting I’ll eventually have to give up on the buying project. .

“The change in monetary policy has been long overdue. The company’s HCM Rapier Fund Class A will continue to operate until the end of August 2022,” said Shun Hong Liu, chief investment officer at Hong Kong Investment Advisors, based in Hong Kong. generated a net profit of 55%.

Defying the trend of many other funds, Liu buys and holds the yen at 130 yen to the dollar, believing that a sharp appreciation of the yen like in 1998 and 2008 will easily occur.

It wouldn’t surprise Japanese politicians to urge Bank of Japan Governor Haruhiko Kuroda to remove the 0.25% cap on 10-year government bonds and try to keep the economy out of turmoil before he retires, Liu said. said. Kuroda will retire next year.

“We are confident in our long Yen positions,” he said, adding that the long positions have so far not impacted performance as much as he has used them as hedges for short trades in other Asian currencies. I added no.

Chua and Liu also warn that the JGB is a bubble that may soon burst, as Japan’s monetary stimulus has simply triggered inflation rather than generated sustained economic growth.

“Japan will see the bursting of the sovereign debt bubble it desperately wants to keep,” Chua said. “If the yen depreciates further and CPI inflation sustains he rises above 3%, that may come.”

Nevertheless, betting on Japanese government bonds, a trade notorious for being a widow maker, has never been easier, given the Bank of Japan’s massive balance sheet and resolute determination to keep its yield curve under control.

JGB’s short trade in the Asia Genesis Macro Fund closed with a total loss of 1.2% this year.

“The ‘widow’ deal remains difficult as Kuroda’s Bank of Japan remains solid,” Chua said.

(Reporting by Summer Zhen; Editing by Vidya Ranganathan and Kim Coghill)



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