UBS said in a note on Tuesday that systematic investors are beginning to trim equity exposure, signalling a shift in positioning among commodity trading advisers (CTAs) even though large-scale outflows have not yet materialised.
“CTAs are starting to show some willingness to reduce equity exposure, although we don’t foresee significant outflows yet,” UBS analysts wrote in a biweekly update on positioning and flows.
In a stress scenario where the S&P 500 drops to 6,200, UBS estimated CTAs could sell between $80 billion and $90 billion of global indices.
That compares with $50 billion to $60 billion projected in the bank’s previous update. “EU core indices – SX5E, CAC, DAX – is where they are likely to cut first. On the other side, IBOV is where they have room to buy,” the note said.
UBS added that bond positioning by CTAs has been steady. They “remain biased towards paying rates, especially the back-end of the curve,” while holding longs in the U.S. belly to “floor their duration beta, which seems wise given the current level of macro/political uncertainty.”
Credit markets could also see reduced exposure, with “Itraxx indices… the most at risk today, especially Itraxx Main.”
In foreign exchange, trading activity has been subdued, with CTAs maintaining longs in EMEA and Latin America currencies while shorting the U.S. dollar and Asian FX, according to the bank.
UBS noted CTAs “will turn net long CNH (vs. USD) for the first time in months.”
The bank stated that CTAs remain broadly constructive on commodities, having purchased across all four cohorts since the last update, with additional agricultural buybacks anticipated.
Source :
https://www.investing.com/news/stock-market-news/ubs-sees-early-signs-ctas-cutting-equity-positions-4219339
