After a pause for Thanksgiving and Black Friday, part four of the daily drip-feed of Goldman Sachs's top trade ideas for 2014 is finally in our inbox.Earlier:
And here it is: “Long China equities/short copper”.
Specifically…
“Open long China equities via HSCEI index and short copper Dec 14 LME future, opened at 0.0% (on return basis, corresponding to respective price levels of 11542.1 and 7064.5) on 2 Dec 2013, with a target of 25% and a stop on a close below -13%.”
Confused? You should be.
As the bank notes, copper prices are usually positively correlated to Chinese equities.
That relationship has to change for the trade to work best. Since late October the two assets have been heading in opposite directions, and Goldman sees that continuing. The bank reckons Chinese stocks will rise next year as the country’s growth stabilizes, but commodity prices will come under pressure because of abundant supplies.
“This long equity/short commodity trade is a way of isolating exposure to China equity risk via a long HSCEI position, which we think is underpriced by the market given our views of stable growth and ongoing rebalancing there, while the copper short hedges out exposure to China’s economic growth, which we think will be stable but not stellar,” Goldman’s analysts wrote in a note to clients Monday....MORE
"Goldman Sachs Explains How To Make Money In 2014, Parts One And Two"
We didn't care for #3.
Can't get enough EONIA?
"On the ECB and EONIA"
