depends on currency, in my opionion. If Aus remains at $0.65- 0.66 level in next few months ($0.63-0.64 now), the FAX asset will be higher than $6.1/s. In addition, FAX gets some currency appreciation from its Korean investiment. Also, paying high div to shareholder is an another way of tender shares from shareholder, but has reversal affects on the share price. For this reason, I would rather to see FAX using retired seculities for tendered shares at NAV, just like South Africa Fund did.
Yes, the AUD is the most important single factor in FAX's NAV and a major factor in its dividend. The great great majority of FAX's Korean debt securities are dollar denominated so it can't get any currency appreciation. It is possible to get credit appreciation from the Korean and other Asian debt which is something not likely with the higher credit rating Australian debt. I can never remember seeing a stock rise on announcement of a dividend cut, in fact a significant drop is almost universally the norm. The degree of the FAX cut could effect market reaction. Dividend concerns most certainly could be priced into FAX, so a small cut might have little effect. If the monthly dividend drops a penny or more, I expect a distinct and noticable drop in FAX's share price. I wouldn't focus too much on any recent rise in FAX's share price. It seems most other closed-end bond funds (at least those that I follow CGF, DSF, & MSY) have been strong as of late.
Did some selling, unloaded all my MSY. I think at a 3% discount, it's fully valued compared to the rest. Had a lot of CGF from the rights ffering and sold some there too, into this recent strenght.
Nice to ses a up move on DSF too. I'm a bit disappointed it has not traded better, at least back to my cost now.
I "monetizing" looking for the right opportunity on a few stocks, FAX for one. Any other CEF's you like? Been a long time between rights offerings, it's always been my lifeblood in this area for new ideas.
If EQUITILINK managers understand the consequnce of div cut, they will not cut the dividend. Then, we may see FAX back to $5.5.
If they do afraid of the falling of NAV, they, instead of cut div, but cut portfolio holding and try to match share price to NAV by tendering shares as I previously described. The FAX's NAV and dividend may lower slightly, but not the share price because of share buyback.
We do not care for the name of FAX! Let it be dissolved within ten years!! Equitink managers can also start up an Asia Income Fund to absorbed the 10+ yrs FAX seculities.
Note that FAX has 5.2% Korean currency
As of December 31, 1999, the portfolio was invested as follows:
------- -----Currency ---- Credit/Geographic Australia -------- 74.8% ---- 74.8% New Zealand -----0.3% ---- 0.3% United States ----14.4% ---- 0.4%* South Korea -----5.2% ---- 11.5%