Its Over

Originally posted by 1ronnie ↑

REDEMPTION RISK

As reported by AFR this morning on Blue Sky (BLA), “…in a separate letter to investors, he (Rob Shand, MD) said 76 of Blue Sky’s 80 fund were closed-ended in nature and would not accept redemption requests”. So the point made is that BLA would not be subjected to redemption risk. But to investors of those closed ended funds, they face redemption risk - Redemption risk relates to how easy/difficult it is for an investor get his/her money out of a fund.

It can’t be a worse feeling that being trapped in a fund or in a stock and at some stage, we may have had experience that. Most people are acutely aware of liquidity risk – risk that your stock has no liquidity and no one wants to buy it when you are in need to sell it. But redemption risk? Probably not so as much.

Funds can get frozen when there is a rush for redemption because managers freeze redemption as they either have little cash or can’t sell those fund assets in a depressed market. I used to remember a prominent blue chip managed Gold Fund that had to sell its gold stocks when gold was falling from its height and there was a large redemption request and by selling, the fund effectively lost its NAV value in the process that is larger than what gold did.

More recently, shareholders got trapped in stocks they had bought for their perceived potential value such as GSW and BIG and subsequently suspended and upon reinstatement they face or likely face a significant erosion in share price. That to me is a form of redemption risk in that you don’t have a choice to sell out at a more decent price had it not been subjected to suspension. Holders of BUD and CIO, amongst others are waiting anxiously.

This takes me to the next point. That is, with ASX on the prowl making queries on announcements made even in retrospect, there is now a new form of redemption risk if your company is in the habit of making unsubstantiated announcements. See OOK reinstatement today after replying to ASX’s query on announcement made in mid-March and the stock is down 9.5% this morning upon reinstatement.

Not being able to sell when you want to or at a more decent price than you would otherwise get post suspension is the same form of redemption risk.

Expand

One good news, finally!

Stock futures surge as China's president vows to cut tariffs on car imports, further open markets

By Mike Murphy
Published: Apr 9, 2018 11:32 p.m. ET
Chinese President Xi Jinping said Tuesday he would cut tariffs on autos imported into China and further open his country's markets, the Associated Press reported. While not mentioning President Donald Trump's name in his speech, Xi's comments may help reduce fears of a trade war between the U.S. and China, after Trump raised tensions by threatening an additional $100 billion in tariffs on Chinese goods last week. Speaking at a business conference on the island of Hainan, Xi pledged to "significantly lower" tariffs on cars, lessen restrictions on car ownership, open China's finance and banking industries to foreign ownership and respect foreign companies' intellectual property, the AP reported. Dow futures YMM8, +1.06% , S&P 500 futures ESM8, +0.95% and Nasdaq futures NQM8, +1.35% all shot up about 1% immediately after the speech

I'm sensing the correction is starting to look over with a possible resumption, albeit choppy, of an uptrend. Unless the FBI raid on Michael Cohen, Trump's lawyer yields something tangible to upstage the presidency (this was the cause of a 400 point turnaround in the Dow in the last hours of trade yesterday).