Short term
Trade view / 13 October 2014 at 7:23 GMT

Update: Allianz shaping up for rebound after Gross bombshell

Global Macro Strategist / Saxo Bank Group - Singapore Hub
Singapore
Instrument: AXAS:xnas
Price target:
Market price:
Update
 
We hit our initial profit target for 50% of the position at 6.80 (entry 6.60), with +3% gross / +75% ann. return on the long Allianz / short Axa spread.
 
The target for the balance is c. 6.90/7.00 which I'd expect us to get to before the end of the month. (Original Trade View posted on September 29)
 
Background 

Allianz, the global insurer that owns PIMCO and constitutes around 7.4% of the DAX, was hit by the news on Friday that Bill Gross will be leaving the latter sending Allianz' shares down more than 6%, which is huge for an insurer of this standing.
To put it another way, this was a more than four times standard deviation move and wiped out over $6 billion of equity value. With Allianz closing on Friday at EUR 128.20 and with the 100-day and 200-day moving averages at EUR 127 and EUR 123, it's worth doing the due diligence to see if this is an opportune time to pick up a long position in the insurer or take a view on the short side if one is expecting things to worsen.
We’ve added a few charts of Allianz versus the DAX to highlight the potentially huge disconnection. (see original post here)
Parameters 
Long Allianz / Short AXA
Entry: 6.58/6.60 (perhaps do 50% of the position today on VWAP, two clips of 25% over the next two days).
Stop: 6.30.
Target: Exit in two 50% clips 
1. Initial clip at 6.80 (+3.0%) [Completed Friday Oct 10, +3.0%grs / +75% ann. rtn] 
2. Balance at 6.90 / 7.00 (+4.5% / 6.0%).
Time horizon: Short-term.
Chart: Axa spread update on first profit-taking level
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source: Bloomberg, Saxo Bank
 
– Edited by Clare MacCarthy
 
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