Omni Macro Fund netted a return of 0.67% in May, bringing up the year to date gain to +2.7%. In the monthly letter reviewed by ValueWalk, Omni’s managers seemed dissatisfied with the measures ECB took most recently. The commentary said that the latest announcement of rate cuts and imposition of a negative deposit rate is in line with ECB’s dovish approach but is not radical enough. Omni said that this line of monetary easing has been successful in helping peripheral European countries but has failed in bringing the euro-zone out of deflation.
Omni Macro: P&L in May
The fund saw some positive movement in its swap positions in CNH and long positions in 1-year USDCNH. The hedge fund also gained from its NOKSEK position as data from Sweden continued to show weakness. The fund suffered in its shorts in copper, but remains convinced that it is positioned on the right side of this commodity. The letter said that the environment is bearish for copper as Chinese investment demand is slumping and industry proxies, iron ore and steel rebar are pulled downwards.
Omni Macro: Domestic buyers make record inflows in TSE
Omni Macro was able to see some traction in its Japan focused portfolio. The letter cited improved capital expenditures as one of the key factors that drove the Japanese market higher in May. After a positive surprise in Q1 GDP, Japanese economic surprise index went up significantly. Global Macro funds have bet that Japanese markets will get a boost as domestic buyers direct their money there. The May letter said that the hiked buying interest from domestic funds in last month was unparalleled. Japan’s pension funds bought $50 billion worth of equity in May, their largest purchase in five years.
Omni Macro: Chinese housing under pressure
Commenting on the economic picture of China, Omni pointed out that Chinese housing market is moving in reverse. The letter said,
“It is readily apparent from the data that the property market is moving into reverse. Prices are now falling, with the “100 City” house price data for May released by the Chinese Real Estate Index System (CREIS) showing a monthly decrease in prices for the first time since mid-2012. The level of housing inventory is a real cause for concern, with the earlier boom in land purchases and construction hitting the market at the wrong time.”
The managers agreed with the analysis of Credit Suisse and Standard Chartered, who have said in their respective notes that Chinese housing is in trouble as more owners look to sell.