How To Be More Like Goldman Sachs, Part Four


Kicking off this week, ignore history and gamble that Chinese companies will grow—but that their favorite metallic addiction will get cheaper, anyway.

“Open long China equities via HSCEI index and short copper Dec 14 LME future, opened at 0.0% (on return basis, corresponding to respective price levels of 11542.1 and 7064.5) on 2 Dec 2013, with a target of 25% and a stop on a close below -13%.”

Confused? You should be.

As the bank notes, copper prices are usually positively correlated to Chinese equities….

“This long equity/short commodity trade is a way of isolating exposure to China equity risk via a long HSCEI position, which we think is underpriced by the market given our views of stable growth and ongoing rebalancing there, while the copper short hedges out exposure to China’s economic growth, which we think will be stable but not stellar,” Goldman’s analysts wrote in a note to clients Monday.

Goldman Sachs's Big Idea #4: Pounce as China and Copper Diverge [WSJ MoneyBeat blog]