November 17, 2008, 3:55 pm
CME Sinks Further On Bets That Hedgies Trading Slows
EXCHANGE SHARES PLUNGE $100 IN NOVEMBER
Hedge fund managers just learned two days ago how vast end-of-year redemptions are going to be at their operations, and havent’ shared the details with the investment community. But shares of exchange operator CME Group (CME) - already wounded by the slide in commodities and the futures contracts tied to them - have behaved as if hedge-fund activites in the derivatives market are going to slow precipitously. The stock, already hammered coming into Monday’s session, slumped to a three-year low, falling back below the $200 a share level, and have relinquished a whopping $100 a share in the month of November alone.
CME shares fell another 8% Monday, as investors use the stock of the exchange as a proxy for the market. Worried that derivatives like oil futures are going to be less-popular investment tools? Sell shares of CME. See copper and other basic materials hit new lows for the year? Dump some more CME. Fretting that once hedge fund managers finish their end-of-year asset dump that those funds are going to take to the sidelines for the balance of 2008? Lose that CME stake in the portfolio.
Fundamentally, CME has managed to hold up relatively well. When it reported its October trading activity update earlier this month, it showed that trading popped about 13% in the month, despite one of the most acrid monthly performances by equity indexes in years. But investors have become increasingly convinced that trading activity is going to slide, as CME shares have lost 34% of their market capitalization since the start of November, when it traded at nearly $300 a share |
