BMPS update & Quick look at Turkey (Koc Holding, Depfa TRY Zero bond)
Today I sold my BMPS “special situation” position at 1,80 EUR per share, a small loss compared to my 1,80 EUR entry price when I factor in transaction costs. The subscription rights stopped trading already yesterday. Overall, the case did not work out very well. The stock was volatile only the very first day and didn’t do a lot ever since as the chart shows:
It seems to be that the regulator has been quite succesful this time to warn market participants against any kind of option based short squeezes. So no “Italian Job” this time. As I have mentioned in the comments of the last post, I do not consider BMPS as a longer term investment. I do think the risk/reward profile of this special situation was good but it just didn’t work out. For the record, I consider the whole transaction as one trade so I still have one potential transaction open or June 😉
Quick look at Turkey
The Turkish Lira and the stock market got hit hard this week as the ruling party did not get the majority of votes.
Politically, one might say that this was actually good news because it clearly enforced democracy in Turkey. Or how the linked Reuters article said:
Erdogan loses his chance to become Turkey’s Vladimir Putin
Financial markets in the short-term however seem to prefer potential dictators to democracy. Although I really like the FT guys, this video shows clearly the opinion of many “pundits”. Especially the currency got clobbered and is almost back (in EUR levels) to early last year’s levels:
In the long run I do believe that a functioning democracy is positive, both for the country and business despite “uncertainties” due to elections. Especially as a public shareholder it is very important that the institutions in a country are properly working. With Erdogan gaining more and more power, I did have my doubts. I don’t know that many positive examples that stock markets with dictators in charge do really well.
My Turkish stock investment Koc Holding is still doing well. In EUR Term, I am still up around +50%. This is mostly due to a quite lucky entry point back in February last year. I still could not motivate myself to increase the position as Q1 results haven been operationally good but net income was lower yoy because of one-offs.
For Koc, a weaker Erdogan/AKP should be clearly positive in the long run as it reduces risk.
Depfa “Kebap bond”
My second “Turkish” investment is the 2020 Depfa TRY Zerobond which I bought almost exactly one year ago. Again I was lucky with the purchase timing. Although I bought at a more expensive exchange rate (2,85 TRY/EUR), I made some money on the bond price so that I am only slightly down.
The interesting thing is the following: Relatively speaking, the bond has become more attractive. This is what I wrote back then:
At a current yield of ~13% p.a., the bond trades around 4% p.a. wider than a 2 year longer EIB Zero bond and around 3% wider than similar Turkish Government (coupon) bonds.
Well, one year later, the bond actually trades 4,2% wider than Turkish Govies and 4,3% wider than the EIB bond. I still believe that there is very little credit risk in a senior Depfa Bond and that at around 50% and a yield of 13,8%, the bond is good value at an Exchange rate of 3,10 TRY/EUR. I might increase the position slightly in the next few days.
Again, it would have been a nice “arbitrage” (unfortunately not fully hedged in the traditional sense) trade. Using the rights you could have entered BMPS for around 1.70 EUR p.s. Today the share price is at 1.90 EUR….
My own Timing was pretty bad as well here….
Tells you once again how difficult (impossible?) it is to guess short term moves (circle of competence anyone?). Just don’t waste too much time with crappy banks, especially since good ones, like Handelsbanken are slowly sliding in interesting territory again. 🙂
yes, it is difficult. But I don’t consider it wasted time. I find it actually quite entertaining….
Edit: By the way, selling according to “the plan” seems to have been a good decision if I look at the current price action….
Could you point me to a link for the documents associated with the bonds? Is there somewhere that also documents the explicit guarantee for these bonds?
the bond has been issued under a general bond issuance program, documents are avialble on Bloomberg. There is no explicit German Governemnt guarantee. In my opinion there is however a very strong “implicit” german Government guarantee.
Who os your broker? I can’t seem to find the Depfa bond on IBKR…
you can trade them with any broker who allows bond trades on German exchanges. I personally use DAB.