After a bumpy April, markets are looking steadier, though derivatives strategists aren’t convinced the calm will hold, Bloomberg writes. Many believe the broader trend of low volatility will continue, thanks to consistent option-selling by income-generating ETFs — though brief intraday shocks like the one triggered by April’s tariff announcement are expected to remain part of the landscape.

Hedging in a two-speed market: With markets in this split state — largely stable but still prone to sudden jolts — investors are weighing two very different hedging approaches. Some are sticking with short-term trades that make money from sharp intraday swings, while others are shifting to longer-dated contracts in anticipation of a more drawn-out downturn. “While we can’t entirely rule out a sudden equity market shock, we expect a more gradual repricing driven by weaker forward guidance — in essence, a low-volatility bear market,” Antoine Bracq, head of advisory at Lighthouse Canton, told Bloomberg.

Traders are adjusting to the “Trump put”: Adding to the complexity is the growing view that future tariff-related headlines may carry less punch, given that US President Donald Trump has shown a tendency to soften his tone quickly when markets react negatively — particularly when the bond market starts flashing warning signs. Bracq says shorting futures might be the most effective hedge in theory, but timing such trades is tricky. “Because of this, we see a more practical approach in exploiting the current levels of implied volatility.”

Some hedge funds are turning to less traditional tools, like volatility knock-out (VKO) puts. These over-the-counter instruments provide protection against downward moves but expire worthless if realized volatility crosses a certain threshold. VKOs are around 40-50% cheaper than standard puts, but they offer little to no protection in the event of a panic-driven selloff.

MARKETS THIS MORNING-

Asian markets are all in the green in early trading this morning, following the news of a trade deal between the US and China. Japan’s Nikkei is up 0.2%, the Shanghai Composite is looking at gains of 0.8%, the Hang Seng is up 1.5%, and the Kospi is up 0.6%.

ADX

9,626

-0.1% (YTD: +2.2%)

DFM

5,313

+0.0% (YTD: +3.0%)

Nasdaq Dubai UAE20

4,425

-0.2% (YTD: +6.2%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.1% o/n

4.1% 1 yr

TASI

11,347

-0.2% (YTD: -5.9%)

EGX30

31,428

-1.1% (YTD: +5.7%)

S&P 500

5,660

-0.1% (YTD: -3.8%)

FTSE 100

8,555

+0.3% (YTD: +4.7%)

Euro Stoxx 50

5,310

+0.4% (YTD: +8.6%)

Brent crude

USD 63.91

+1.7%

Natural gas (Nymex)

USD 3.80

+5.7%

Gold

USD 3,344

+1.2%

BTC

USD 104,154

+0.4% (YTD: +11.5%)

Chimera JP Morgan UAE Bond UCITS ETF

USD 3.60

+0.0% (YTD: +1%)

S&P MENA Bond & Sukuk

143.41

-0.1% (YTD: +2.5%)

VIX (Volatility Index)

21.90

-2.6% (YTD: +26.2%)

THE CLOSING BELL-

The DFM remained flat on Friday on turnover of AED 426.4 mn. The index is up 3.0% YTD.

In the green: Dubai Refreshment Company (+13.5%), National International Holding Company (+5.6%) and ENBD REIT (+4.8%).

In the red: International Financial Advisors (-7.5%), National Cement Company (-6.7%) and Union Properties (-4.0%).

Over on the ADX, the index fell 0.1% on turnover of AED 1.3 bn. Meanwhile, Nasdaq Dubai was down 0.2%

CORPORATE ACTIONS-

UAE-based fertilizer and ammonia producer Fertiglobe will distribute a USD 125 mn cash dividend for 2H 2024 — equivalent to 5.5 fils per share — after shareholders approved the board’s recommendation at the company’s recent annual general assembly meeting (pdf). This brings its total dividend for FY 2024 to AED 1 bn.

Share buyback: Shareholders authorized Fertiglobe to buy back up to 2.5% of its issued shares provided the purchase price falls within ADX price trading limits.

ADX-listed Agility Global has approved a AED 239.6 mn dividend payout to shareholders for 2024, according to an ADX disclosure (pdf). The distribution amounts to AED 0.023 per share.

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