2017 has started out with a bang with the NASDAQ already up 3% on the year. The SPX has lagged it but 1.3% ain't bad either. What is heartening to see, from sitting here in Europe, is that the German DAX is keeping pace with the SPX in Dollar terms, up 1.25%. While these moves catch our attention, what has quietly rallied the hardest this year is the Hang Seng, up a fantastic 4.2% already, closely followed by the Nikkei at +2%. China is already setting out to be the dark horse and we’ve found a great way to play that trade—through the Deydun China Internet & Gaming Index– which we will describe in another note shortly.

Meanwhile, those are the pleasant ytd stats. On the flip side, two things are getting murdered - The Turkish Lira and now, slowly but surely, the Mexican Peso. The big themes for 2017 are already emerging. It's time to start putting on the big trades as everyone settles under the comfort of their desks post Xmas.

Let's start with the introduction of a very focused strategy. We have created a Deydun European Exporters Index (will be available to all our clients to monitor on Bloomberg) - made up of just 10 stocks - which in one shot gives you exposure to the large and liquid names in Europe, to play what could be a powerful theme. The two charts below show you what is going on with this Index.

It is not often that you will find stocks in Europe that are not only looking great against their benchmark European Indices, but also against the hardest Index to look great against : The S&P. The chart on the left shows you this Deydun Index breaking out with clarity against the SPX. This is an instructive breakout as it is happening after having gone sideways, spending considerable time forming a base through all of 2016. Now that the breakout has happened, the risk of owning this Index has been considerably reduced. The chart on the right shows you a breakout of our Index against the SXXP. That is not hard to believe. Anything that breaks out against the SPX must surely be breaking out against the rest of Europe. This breakout suggests that the Euro remains under pressure If there is one high conviction trade to put on early doors in 2017, let this be the one. You can short any major Index against it. And monitor it live on Bloomberg.

What’s behind this trade….

Clearly, these breakouts suggest that the Euro is likely to be a driver of this trade. Regardless, the stocks that we have carefully selected for this Index also have a strong China component to them. And if the HSCEI is going to breakout along with the Hang Seng, this Deydun Index will catch a huge bid as the quarter rolls on. It is our firm contention that this Index will beat any global benchmark Index for at least the next 8-12 weeks. There is no point making a call longer than that just now. If it works and looks great by the end of the Quarter, there will be nothing stopping us from keeping it on for another few weeks.

Elsewhere, an outrageous move is taking place right here right now in the Turkish Lira. And as we head into the Trump inauguration, the Mexican Peso is threatening to take the cue from the Lira and start an implosion of its own. All of this is very reminiscent of the big run that Stan and George made on the Thai Baht, Korean Won and the Indonesian Rupiah in the late 1990s. Only this time, its not the hedge funds that are breaking these currencies. Geo-politics and the ineffable wisdom of the market are. For Emerging Market players, being short EWW (Mexico) against FXI (China) makes a lot of sense. More on that shortly.

CONTACTS:

Ashwani Mathur | ashwani@deydun.com | +44 (0) 207 725 1008

Kasim Ahmed | kasim@deydun.com | +44 (0) 207 725 1005

Sujit Kapur | sujit@deydun.com | +44 (0) 207 725 1009

Satwinder Sehmi | sat@deydun.com | +44 (0) 207 725 1004

We can also be found on Bloomberg at DEYD<GO> and via our website at www.deydun.com

Disclaimer

Important Notice: This report is independent and prepared by Deydun Markets Limited and is for information purposes only. This presentation has been produced or compiled for use by Eligible Counterparties and Professional Clients only and it is not intended for Retail Clients as defined by the rules of the United Kingdom’s Financial Conduct Authority. This presentation may not be reproduced, distributed or published for any purpose, unless with the prior written consent of Deydun Markets Limited. This report does not constitute an offer, invitation or inducement to invest in securities or other investments. This report does not make recommendations or give advice to potential investors in relation to buying, selling, subscribing for, underwriting or exercising any rights in relation to particular securities or other investments. Neither the information contained in this report nor any further information made available with the subject matter contained herein will form the basis of any contract. This report does not purport to be comprehensive or to contain all the information on which a prospective client may need in order to make a decision. The information is derived from sources, which we believe to be reliable, but we do not represent it is accurate or complete. The recipient of this report must make their own investigation and assessment of the information presented herein. No representation, warranty or undertaking, express or implied, is or will be made or given and no responsibility or liability is or will be accepted by Deydun Markets Limited or by any of its directors, officers, employees, agents or advisers, in relation to the accuracy or completeness of this presentation or any other written or oral information made available in connection with the information presented herein. Any responsibility or liability for any such information is expressly disclaimed. The information in this presentation is subject to change without notice. In providing this report, Deydun Markets Limited undertakes no obligation to provide the recipient with access to any additional information, or to update, or to correct any inaccuracies, which may become apparent in this presentation or any other information made available in connection with the information presented herein. Deydun Markets Limited is an Appointed Representative of Exotix Limited, which is authorised and regulated by the Financial Conduct Authority.

UNITED STATES OF AMERICA: Distribution of this Material in the United States or to US persons is intended to besolely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. No representation, warranty or undertaking, express or implied, is or will be made or given and no responsibility or liability is or will be accepted by Deydun Markets Limited or by any of its directors, officers, employees, agents or advisers, in relation to the accuracy or completeness of this presentation or any other written or oral information made available in connection with the information presented herein. Any responsibility or liability for any such information is expressly disclaimed. The information in this presentation is subject to change without notice. In providing this report, Deydun Markets Limited undertakes no obligation to provide the recipient with access to any additional information, or to update, or to correct any inaccuracies, which may become apparent in this presentation or any other information made available in connection with the information presented herein. Deydun Markets Limited is an Appointed Representative of Exotix Limited, which is authorised and regulated by the Financial Conduct Authority.

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