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THE M3: MACAU LEGEND IPO

THE MACAU METRO MONITOR, JUNE 10, 2013

 

 

MACAU LEGEND'S IPO AIMS TO RAISE UP TO US$786 MILLION Macau Business

Macau Legend Development Ltd is looking to raise up to US$786 million (MOP6.3 billion) in its upcoming HK IPO.  Previous reports said the company was looking to secure US$600 million from the operation.  The company and shareholders Lam Fong Ngo and Grand Bright are selling 2.05 billion shares in the offering, of which 86.2% are new shares issued by Macau Legend, and the remainder existing stock from the two shareholders.


Macau Legend is offering the shares in an indicative range of HK$2.30 (US$0.3) to HK$2.98 each.  The listing is scheduled for June 27.  The proceeds will go to financing the redevelopment of the Macau Fisherman’s Wharf theme park.

 


June 10, 2013

June 10, 2013 - DTR

 

BULLISH TRENDS

June 10, 2013 - 10yrA

June 10, 2013 - spx

June 10, 2013 - dax

June 10, 2013 - dxy

 

BEARISH TRENDS

June 10, 2013 - VIX

June 10, 2013 - yen

June 10, 2013 - oil

June 10, 2013 - natgas

June 10, 2013 - gold

June 10, 2013 - copper

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – June 10, 2013


As we look at today's setup for the S&P 500, the range is 45 points or 1.18% downside to 1624 and 1.56% upside to 1669.     

                                                                                                                          

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.87 from 1.87
  • VIX closed at 15.14 1 day percent change of -8.96%

MACRO DATA POINTS (Bloomberg Estimates):

  • 9:50am: Fed’s Bullard speaks in Montreal
  • 11:00am: Fed to purchase $1b-$1.5b notes in 2017-2043 sector
  • 11:30am: U.S. to sell $30b 3M bills, $25b 6M bills
  • U.S. Rates Weekly Agenda

GOVERNMENT:

    • President Obama speaks on Equal Pay Act’s 50th anniv.
    • Jeff Chiesa, R-N.J., is sworn in as U.S. Senator
    • House, Senate in session
    • Senate Commerce Cmte votes on nominations of Penny Pritzker for Commerce Sec., Anthony Foxx for Transportation Sec.
    • Senate to vote on Leahy amendment to farm bill, S. 954, followed by final passage, 5:30pm
    • Fed issues interim rule on how to treat American branches of foreign banks for a section of Dodd-Frank that prevents bailouts of swaps dealers

WHAT TO WATCH

  • Google said to be buying Waze for $1.1b for social maps
  • Apple holds Worldwide Developers Conf.; to unveil new iOS
  • Elan board rejects raised $6.7b Royalty Pharma offer
  • AstraZeneca to buy Pearl Therapeutics for up to $1.15b
  • SoftBank’s clearance for Sprint deal confirmed by officials
  • China May industrial output rose 9.2% vs est. 9.4%
  • Marchionne says Fiat may acquire Chrysler stake before IPO
  • JBS said to agree to buy Seara food assets from Marfrig
  • Exide files for Chapter 11 bankruptcy after losing Wal-Mart
  • McDonald’s May global comp. sales seen gaining 1.9%
  • GE CFO Sherin said to take over finance arm as soon as summer
  • CBS said nearing $2.7b in upfront advertising commitments
  • Hawke horror film “The Purge” outsells Vaughn/Wilson duo
  • Japan revises growth to annual 4.1% in boost for Abe
  • Obama tells Xi that China must act against cybertheft
  • Pentagon’s cybersecurity plan calls for $23b through 2018
  • U.S. Weekly Agendas: Finance, Industrials, Energy, Health, Consumer, Tech, Media/Ent, Real Estate, Transports
  • North American M&A Agenda
  • Canada Weekly Agendas: Energy, Mining
  • Retail sales probably rose in May: U.S. Weekly Eco Preview
  • U.S. Retail Sales, BOJ, Iran, U.S. Open: Wk Ahead June 10-15

EARNINGS:

    • Navistar International (NAV) 4pm, $(1.20)
    • Lululemon Athletica (LULU) 4pm, $0.30
    • Diamond Foods (DMND) 4:01pm, (-$0.19)
    • Annie’s (BNNY) 4:06pm, $0.28
    • Pep Boys (PBY) 4:41pm, $0.09

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • WTI Trades Near Two-Week High on Economy; Sudan Oil Threatened
  • Gold Bull Bets Reach Seven-Week High Before Retreat: Commodities
  • China Approves Gold-Backed ETPs as Domestic Buyers Chase Bullion
  • Gold Declines to Two-Week Low in London on U.S. Stimulus Outlook
  • Corn Drops With Soybeans as Dry Weather May Aid Crop Conditions
  • Freeport May Declare Force Majeure If Grasberg Shutdown Extends
  • JBS Becomes Largest Chicken Producer With Marfrig Deal
  • Rupee Slump Set to Boost Costs for India Bullion Importers
  • Palm Oil Falls From Two-Month High on Concern India May Buy Less
  • Allana in Ethiopia Snubs Potash Supply Concern: Corporate Canada
  • Sudan Threatens to Shut South Sudan Oil Over Rebel Support
  • San Onofre Seen as Latest Setback for U.S. Nuclear Power: Energy
  • Bullion Bear Market Seen Extending to $1,303: Technical Analysis
  • Deutsche Bank Starts Singapore Gold Vault With 200 Ton Capacity

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 


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Bullish Places

“Books can lie, but places never do.”

-Jack Weatherford

 

I love that quote. Jack Weatherford uses it in the Introduction to this epic book I am still reading – Genghis Kahn and The Making of The Modern World.  Politicians and market pundits can lie too, but markets are always scoring the truth.

 

Some will disagree and say that markets are often wrong. Agreed – if the market goes your way on the timeline that you outlined prior to taking your position, that is. Being positioned for what the market currently accepts as truth is the name of the game.

 

If you could be right every day, you would be. Very few will disagree with me on that.

 

Back to the Global Macro Grind

 

Last week’s employment data continued to drive home a very simple, but trending, score in 2013 – US employment and consumption growth is accelerating. This shouldn’t have been a surprise by the time you saw the sequential improvement in the payroll data on Friday. Our preferred leading indicator (non-seasonally adjusted rolling jobless claims) has been trending bullish for 6 months.

 

Every 3 months, we update our Top 3 Global Macro Themes @Hedgeye. This quarter I was definitely nervous about one of them. Making a call that US growth could go from stabilizing to accelerating was more of a question to us than it was a definitive answer. Throughout Q213 however, US employment, housing, and consumption data has improved, impressively.

 

To review - our Macro Themes for Q2 2013 are:

 

1.       US #GrowthAccelerating

2.       #StrongDollar

3.       #EmergingOutflows

 

Since the fulcrum factor in our trending themes remains the US Dollar, last week’s abrupt selloff in the US Dollar versus the Japanese Yen definitely mattered. An immediate-term TRADE does not an intermediate-term TREND make though, so this morning’s -1.25% reversal in that move to #StrongDollar’s benefit has me smiling again.

 

Alongside a big bounce in #StrongDollar versus Burning Yen, this is what you get pre-open:

  1. Gold and Silver down another -0.5-1.3%, respectively
  2. Copper and Corn down another -1.1-1.3% respectively
  3. US Equity Futures up another 6 handles, following Friday’s +1.3% bullish breakout back above 1624 SPX

If you are betting on growth, you’ve recognized that the market’s version of the truth is currently paying people who have embraced the non-consensus bullish case that #StrongDollar is a pro-growth signal. You can see that in the following trending correlations:

  1. USD vs SP500 (on our intermediate-term TREND duration) has a positive correlation of +0.81
  2. USD vs Gold (on our intermediate-term TREND duration) has a negative correlation of -0.72

Moreover, if you want to dig into the multi-factor, multi-duration update, these correlations have actually strengthened across multiple factors in the last month. In addition to rising US Treasury yields, here are some more pro-growth signals to consider:

  1. US Financial Stocks (XLF) are +4.2% in the last month vs slow growth Utility Stocks (XLU) at -4.5%
  2. Low Dividend Yield stocks (i.e. higher growth stocks) = +20.9% YTD
  3. High Short Interest stocks (i.e. the ones that squeeze hedgies shorting them on “valuation”) = +19.1% YTD

Again, the score in the book may very well feel like a lie to people who are still bearish on growth, but where this market has scored the game for 2013 YTD isn’t. I’m not a fan of investing alongside what people are “feeling” anyway.

 

Another score that is developing quickly here is that a #StrongDollar eventually drives underperformance in Emerging Markets.  We call this Theme #EmergingOutflows and it’s worth scoring this morning as well:

  1. MSCI Emerging Markets Index = down another -2.4% last week and -6.6% for 2013 YTD
  2. China’s Shanghai Composite Index = down another -3.9% last week and -2% for 2013 YTD
  3. Brazil’s Bovespa Index = down another -3.6% last week and -15% YTD

Investors we speak with on #EmergingOutflows fall into 1 of 3 camps:

  1. Bearish on everything (we aren’t) – so they think Copper and China going down is bearish for US stocks
  2. Bullish on Global Growth (we aren’t) – so they think they should buy Emerging Markets because they “look cheap”
  3. Bullish on US #GrowthAccelerating and #StrongDollar – so they are bearish on Emerging Markets tied to commodities

We’re obviously in the 3rd camp. Looking at this week’s contra-indicator camps (weekly futures and options contracts in the CFTC data) we’re still seeing Camp 1 A) buy Gold (weekly net long position +19% wk-over-wk) and B) short SPY (there’s still a net short position in SPY right now of -3,061 non-commercial contracts).

 

I’m not saying we’re going to nail the macro call in perpetuity. All I’m saying is that last week was one of the top 6 times in the last 6 months that you’ve had to re-load on the long side where it’s actually working. Bullish Places are as bullish does.  And, globally, they are getting harder and harder to find.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST10yr Yield, VIX, and the SP500 are now $1, $100.27-105.25, $81.31-82.96, 96.05-99.98, 2.07-2.22%, 13.77-15.87, and 1, respectively.

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bullish Places - Chart of the Day

 

Bullish Places - Virtual Portfolio


MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION

Takeaway: The XLF continues to rise in the face of broad deterioration in company and sovereign credit swaps. High Yield, meanwhile, blasts off.

Key Takeaways:

 

High Yield – High Yield rates rose 36.5 bps last week, ending the week at 6.11% versus 5.75% the prior week. This is disconcerting, as we've historically observed fairly tight correlations between U.S. Financials, particularly large caps, and junk yields. The current divergence is an outlier vs. history.

 

* European Financial CDS - European financials swaps widened considerably, increasing by a median of 18 bps. The U.K., Spanish and Italian banks widened sharply. Italian banks, in particular, were materially wider.

 

American Financial CDS -  Morgan Stanley was a significant outlier last week, widening by 15 bps to 133 bps. The rest of the large caps were narrowly tighter or slightly wider. It was another week of spreads backing up for mortgage insurers and bond guarantors.

 

XLF Macro Quantitative Setup – More risk than reward in the short-term. Our Macro team’s quantitative setup in the XLF shows 1.8% upside to TRADE resistance and 3.0% downside to TRADE support.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Negative / 2 of 13 improved / 6 out of 13 worsened / 5 of 13 unchanged

 • Intermediate-term(WoW): Negative / 3 of 13 improved / 6 out of 13 worsened / 4 of 13 unchanged

 • Long-term(WoW): Positive / 4 of 13 improved / 2 out of 13 worsened / 7 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 15

 

1. American Financial CDS -  Morgan Stanley was a significant outlier last week, widening by 15 bps to 133 bps. The rest of the large caps were narrowly tighter or slightly wider. It was another week of spreads backing up for mortgage insurers and bond guarantors.

 

Tightened the most WoW: MET, C, JPM

Widened the most WoW: RDN, TRV, MS

Tightened the most WoW: MBI, AGO, UNM

Widened the most MoM: SLM, AXP, RDN

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 1

 

2. European Financial CDS - European financials swaps widened considerably, increasing by a median of 18 bps. The U.K., Spanish and Italian banks widened sharply. Italian banks, in particular, were materially wider.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 2

 

3. Asian Financial CDS - Indian banks were notably wider last week, with State Bank of India widening by 17 bps and IDB Bank of India wider by 20 bps. Chinese banks were also wider, by an average of 7 bps. In Japan, swaps were mixed, with three advancers, two decliners and one unchanged.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 17

 

4. Sovereign CDS – Sovereign swaps were wider around the globe with the sole exception of Germany, which tightened 3 bps to 24 bps., and now trades inside the U.S. by 4 bps. The biggest movers were Portugal, Spain and Ireland at +16, +12 and +8 bps, respectively. 

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 18

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 3

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 36.5 bps last week, ending the week at 6.11% versus 5.75% the prior week.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index fell -6.3 points last week, ending at 1793.16.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 6

 

7. TED Spread Monitor – The TED spread fell 1.5 basis points last week, ending the week at 23.2 bps this week versus last week’s print of 24.7 bps.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 7

 

8. Journal of Commerce Commodity Price Index – The JOC index rose 0.4 points, ending the week at 3.6 versus 3.2 the prior week.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 9

 

10. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 10

 

11. Markit MCDX Index Monitor – Last week spreads widened 9 bps, ending the week at 75.5 bps versus 66.3 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 11

 

12. Chinese Steel – Steel prices in China fell 1.4% last week, or 47 yuan/ton, to 3422 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 185 bps, -3 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.8% upside to TRADE resistance and 3.0% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD IMPLOSION - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT


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