Date: April 10th, 2025
RECAP
As of early April, the Mag Asia trade has been an extremely profitable trade; however, there have been several other periods in the last year (Aug 2024, Oct 2024) where there was also a strong correction, only to have a rapid recovery and climb to new highs. I do not have that high of conviction that the market sell-off will be the start of a longer-trend bear market.
In the past few weeks, the MagAsia stocks have sold-off sharply; Fujikura by over 50 percent. The entire portfolio approximately 30 percent. As this has been an unhedged trade, it’s been very profitable.
The MagAsia Portfolio
I am now more concerned about whether to hold, or just to take profits and revisit at a later date. The main concern is that there may be a resolution on the US-China trade war which would send the markets soaring again. Why not wait it out.
Having said that, there is an age-old rule that you ‘need to ride out your winners … to pay for the losers’ and I’m concerned about exiting too early. The fact is that this particular sub-set of stocks has still had over a 100% appreciation to the Nikkei since the start of 2023. It remains very over-valued and with bogus “AI” valuations.
Nevertheless, I’d prefer to take risk off the market at the time being, and revisit the trade later. The correction has been so rapid that it’s likely the bounce will be strong. I think the easiest solution is take some profits, and to hedge the portfolio. Correlations with the Nikkei will be high during this volatile period.
It should be noted that after this recent market correction the Nikkei has given up all the gains of the last two years.
