Trader profile: Keeping a close eye on quantitative easing

Name: Naeem Aslam

Position: Global head of market analysis at Ava Capital Markets, an online trading platform.

Experience: 8 years


What is the asset class and geography you are focused on?

I am a global market strategist, and I cover foreign exchange markets, stocks and commodities across the world. On our company account, the positions we take are usually to hedge our risk against market risks. I also trade for my own personal portfolio in equities and commodities.

What is your outlook for the month ahead?

Quantitative easing is the key trend. We are confident that both the European Central Bank and the People’s Bank of China will remain committed to easing, which will address any slack in these economies, and lift equities.

Our two most popular geographic locations are euro zone and China. Both regions have serious growth problems and their central banks are committed to do whatever it takes to spur growth. We anticipate that the US will maintain its steady growth, and the fragile growth of the first quarter will pick up steam in the next few quarters. But in terms of stock picking, we advise being extremely selective. Technology, consumer discretionary and financial are our favourite sectors in US equities.

In Europe, valuations are much more attractive and cheaper than in the US — so we are confident that the rewards are greater. Moreover, the stock market in the euro zone also has a strong tailwind in the form of QE. The DAX index is the best performing index and it is much easier to have an exposure to the index by buying futures or exchange-traded funds, meaning that you do not have to worry about the individual stocks or sector. This is also true of China — but there, valuations are stretched.

What are the main risks, either upside or downside, to the outlook?

In the euro zone, the major risk is associated with Greece. If Grexit occurs, this will be a serious problem. It could spread like a cancer. Even though some officials from the euro zone are confident that the risk of contagion is minimal, we believe they are underestimating the risk. Or perhaps the Lehman crisis has faded sharply from memory.

What is the best investment at the moment?

In China, stocks that rise along with increased consumption look good. QE in Europe looks likely to boost the DAX. And we also like the look of Apple, in which we are invested.

Tomorrow, Apple will announce its earnings and it will be the market-moving news. Apple’s weight in Nasdaq is nearly over 23 per cent, which is massive — if Apple sneezes, the entire index gets sick. Our model predicts that the company could have sold nearly 58 million iPhones, which is well above the street estimate of 55 million. The Apple Watch has been a massive success for the company and it could have a very significant effect in the coming quarters.

The company has a huge share buyback programme, launched in 2012. Under this programme it has returned about $100 billion to shareholders. Their ambitious plan is to increase this number to $130bn by this year end.

Secondly, if you are an investor who likes a steady income, Apple fits the bill for you. They boosted their dividend by 15 per cent last year, and 8 per cent this year.

Thirdly, Tim Cook, Apple’s chief executive, has publicly announced that too much cash is parked on their balance sheet, which will be redistributed to shareholders. That is music to shareholders’ ears.

What was the best investment you were ever involved in?

Our best investment has been in Apple — it’s our heaviest position in any stock. The AppleWatch has been a success for the company. We are optimistic about the iCar — if that’s successful, that could allow Apple to move into another industry altogether. We have had a position in Apple for more than four years. We constantly maintain our position in Apple — sometimes we overweight our position, and sometimes we reduce our position, depending on short-term changes in price, earnings, and product launches. Our rate of return has been 22 per cent compound annual growth rate. The only reservation we do have is with fake and black market products — the Shenzhen iWatch is available for $50, and some of the apps are even better than the apps on the iWatch.

What was the worst?

On Twitter, we got caught on the wrong side of the trade. We invested in March last year. We bought it the high fifties, but the stock price dropped to the mid-thirties. We got out at the low fifties, because all our trades have a stop-loss order set at 4 per cent — our maximum loss. The stop-loss command can save you from disaster.

We believed, and still believe that Twitter is a good stock to buy — but currently, the company isn’t producing enough earnings. The business model hasn’t changed significantly. We are optimistic about the scope for Twitter to make business sense in the future. The most value Twitter can gain is by being the default platform for breaking news. More breaking news comes from Twitter than anywhere else. We can imagine Twitter becoming a universal wire service.

abouyamourn@thenational.ae

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