Trade Ideas & What I'll be watching in the week ahead (July 26- Aug 1, 2001)

 No new trade ideas that I'll be putting on this week but there were some positive headlines over the past few days that strengthen my conviction in the three trade idas from last week. By far the biggest news in the space emerged out of China as the CCP, in what is becoming increasingly familiar, has taken action against burgeoning companies. This week China aimed its sight on the for-profit education sector & companies such as $TAL, $EDU, & $GOTU have all shed > 50% of their market caps since Thursday. Outside of the sector ride-hailing champion $DIDI has slumped > 20% in after-hours trading over the weekend since the Friday close. Investors the world over cannot help but notice that many of the firms that have rankled the CCP & have seemingly come under attact from chinese regulators are firms that listed outside of China. Chinese firms have listed outside of the Chinese mainland to assure investors that they will be adhering to western standards of accounting & respect of property. If China chooses to go about convincing homegrown firms to list at home by retaliating against firms that choose to do their initial listings abroad I do not forsee global investors being all that enthusiastic about investing in the ADRs of said Chinese listed firms. My advice would be to go with a more carrot based approach. As I'm doing this in a personal capacity & not say w/ the capital base of an institution I stick away from china securities because understanding the day-day developments there is very much not my strong suit & I choose to stick with the countries & securities I have a much better understanding of & where I am much more confident in my abilities to anticipate how the market will respond to emerging developments. But anyone plying their trade in the EM space has to stay attuned to what is going on in China. China has integral trading relationships with every other major player in the space & of course the US as well. And so while this blog will continue to focus on sovereigns & currencies it will very much be keeping a close eye on what is going on in the chinese corporate space. Alright to the current trade ideas.

1. South Africa- The protests in SA have fizzled out & yet both the bond & the ZAR slipped slightly over the week, giving up a touch of their gains from the previous week but still way off their levels from earlier in the month before the arrest. No reason to sell yet. 

Ticker:ZA10Y  Duration: < 3 months 

2. Mexico- A series of headlines emerged during the week supporting my bear thesis on the peso. Mexico will be looking to suspend import quotas to combat rising food prices & the dispute w/ the US over rules concerning the auto parts sector is no closer to resolution. ↗ imports resulting from food inflation, ↘ exports resulting from the headwinds on crude prices in the aftermath of the opec+ deal = ↓ BOP. This should result in a weaker Peso. Furthermore it isn't difficult for a string of negative headlines & the realiziation of a potential very harmful covid outbreak following the one here in the states resulting in a bearish sentiment taking hold among global investors and sell off of MXN securities. https://www.bloomberg.com/news/articles/2021-07-23/mexico-willing-to-use-import-tools-to-fight-food-inflation?sref=EROITBzT https://www.bloomberg.com/news/articles/2021-07-23/u-s-and-mexico-fail-to-resolve-dispute-on-trade-rules-for-cars?sref=EROITBzT https://www.bloomberg.com/news/articles/2021-07-23/covid-explodes-in-cancun-and-los-cabos-as-third-wave-hits-mexico?sref=pvyPqm4u I still like long USD/MXN & short MXN/CAD

Tickers: MX10Y, USD/MXN, MXN/CAD Duration: 6-9 months

3. Chile/Peru/Bolivia/Ecuador- The peruvian election result is finally official as Ms. Fujimora finally conceded. This reduces the chance of a left-tail event in the case of violence surrounding the swearing in of incoming President Castillo. My reason for being bullish these countries remains. However if we start to see some real turmoil in the chinese corporate space then I will of course be revising and looking to exit. 

Obligatory mentions for a weekly summary

Argentina- Still Argentina :( These dueling headlines publishd on the same day around the same time did give me a good laugh nonetheless (see pic). https://www.reuters.com/article/argentina-debt-buenosaires/update-1-buenos-aires-province-expects-high-take-up-in-7-bln-debt-offer-source-says-idUSL1N2OZ241 It would be good news indeed if there high takeup of the offer but without knowledge of if there is indeed a CAC in play its hard for me to say definitely just how 'good' this news is. Anyone out there with a cbonds subscription want to look it up and let me know will be greatly appreciated :) https://cbonds.com/bonds/12695/

Lebanon- Situation only growing more dire. Several heartbreaking stories in the intl press this week. My heart goes out to the people there.

El Salvador- Can't imagine their pumped about the price action in BTC.