Shorting the Australian dollar is one of the most popular trades in the world right now.
But the co-founder and chief executive of hedge fund PAAMCO, Jane Buchan, thinks it’s a waste.
Speaking to The Australian Financial Review, she explained investors are making a big mistake by shorting the currency on the assumption Australia would be impacted by slowing growth in China, labelling them “macro tourists”.
“Shorting China is one of the most popular trades in the world at the moment and a lot of US hedge funds have been shorting the biggest Australian banks, miners, and the Aussie dollar as a proxy trade,” she said.
“People in the northern hemisphere are so bearish on China due to a very simplistic view based on what has happened in other developing economies historically. The power of what a command-control government can achieve is being underestimated.
“Shorting the Aussie dollar looks set to prove a 20-year widow-maker trade, much like shorting Japan bonds has been.”
PAAMCO is a $US9 billion ($9.6 billion) fund of hedge funds, which means it allocates investment cash to emerging managers but does not buy them.
According to the report, it has very little exposure to Australia, described by Buchan as just “a small number of curve trades on the yield curve and a couple of bonds in the oil and gas sectors, but nothing meaningful in equities”.
There’s more here.