150928_da_divergence asset
TRANSCRIPT
Divergent Asset Movement in Indonesia
Dimas Aryotejo
September 28th, 2015
Sell in May and Go away
There’s a believe in the financial market that when entering the month of May, we need to sell asset and go away.
Analyst and Investor may comment the event above happens due to holiday in US market and most of the investor is satisfied with the dividend that they will receive from their previous fiscal year. Company dividend ussually take place in the month of May to July.
The comment and analysis above might be true, but would it wise to sell the asset and just wait until the market give reversal signal?
Sell in May and Go away
Then if we just wait the reversal signal, should we do nothing in five months (May-Sept)?
Or can we find something to hedge the current condition?
The answer will be, yes we need to hedge the current condition.
Q : What can we do to the current condition?
A : By finding the Divergent Asset Movement.
In the next slide there is a real example on Arbitrage the Asset movement.
IDR Currency
In early May 2015 I advise my auntie who is worried by IDR depreciation to buy USD to ease her worrynes.
At that time IDR was at 13.165/USD. My analysis was because emerging market is waiting for the fed rate hike that makes the IDR depreciate against USD. Since my advised date IDR is depreciating 11,62%.
Commodities
Also In early May 2015 in a group discussion I advise my acquintance to pay attention to the commodities and plantation movement. then I received feedback saying that I ignore the fact that commodities its in bearish tren due to oil price.
Simple analysis would be Commodities is hit by the strengthen of USD index, and the extraordinary event was NYMEX crude light oil is droping so fast is just like the demand of energy will also go by minimum.
In my view the above condition will give a window of chance for the commodities to have its rebound if we could not say it is reversal already.
Commodities
NYMEX Crude Light Oil movement between Mei and August.
Commodities and Plantation
Now lets comeback to watch the movement from Commodities (non energy) and Plantation asset within Jakarta Composite Index (JCI).
INCO.JK and LSIP.JK movement in April and May 2015.
Commodities and Plantation
Based on INCO and LSIP mei movement I analyze their 1Q 2015 financial report, and draw a conclusion when there is a chance for these asset to rebound they will beat the JCI index return or there is best chance that they will move divergent against JCI index .
*Above conclusion have not calculate the MoM correlation with JCI.
Commodities and Plantation And when Crude Oil was rebound, the other assets was .....
Divergent Asset Movement
Now lets calculate the return including the first initial investment in IDR Currency, assuming your initial investment is IDR100.000k.
On May 29th bought USD against IDR at 13.165/USD,
then on August 27th sold USD against IDR at 14.135/USD, you return was 7,37%. Resulted IDR 107.370k.
On August 27th near the JCI market close, bought LSIP with 50% allocation at IDR1.020, then sold on Sept 28th at IDR 1.415 with return 38,73% . Resulted IDR 74.480k
On September 2nd near the JCI market close, bought INCO with 50% remaining allocation at IDR1.320, then sold on Sept 28th at IDR 2.105 with return 59,47% . Resulted IDR 85.611k
Divergent Asset Movement
So the conclusion is from the Divergence Asset Movement your return is IDR 67.461k or equal to 67,46% in 4 months.
During June to September 2015 period Jakarta Composite Index (JCI) return is given you minus 21.22%.
Using Divergent Asset Movement to Invest in wikipedia often called Arbitrage pricing theory
Appendix
• Chart is using EIKON 4.03 MetaStock Chart.
• Data feed is using Thomson Reuters EIKON 4.03.
• Analysis by Dimas Aryotejo
We do not do forecast because everything been written