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.
I sold a little of my CGF - my original holding. Would like to hold CGF long enough for a long term capital gain and perhaps into 01.
Probably a lot of people feel the same way, so might be a price drop at those times.
I agree that DSF is not fully valued in relation to fundamentals. Maybe the small market cap?
I would love to find a few "special situtations" right now such as rights offerings or arbs on REIT MBO/LBOs. Not too many of them around.
I am liking Europe more and more. Our dollar is strong and they appear to be getting some of their economies turned around. Of course I am interested in equity over debt there. I had a buy in for the Austria Fund this morning, but it took off and it won't be filled today. Also interested in the Ireland Fund.
Will probably buy FAX somewhere below $5, if it drops that far down.
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%
"If EQUITILINK managers understand the consequnce of div cut, they will not cut the dividend"
First look at a few things. 1) the funds investment portfolio only earns 80% of what it pays out, 20% is paid out of the principle. By paying out of principle it's turning after tax money YOU put in and turning them into taxable dividends, not a very sound practice, do you agree?
2)Many funds do not like to tender shares because many times it has a short term effect. A high payout has proven to be more effective from what I see. But I do agree many times buybacks make more sense than taking matured bonds and buying 8% coupon bonds, when the fund is trading at a 15% discount.