From: Daniel Sabba Sent: 11/3/2014 12:17:38 PM To: [email protected] CC: Paul Morris ; Vahe Stepanian ; Stewart Oldfield Subject: Update in USDCNH Attachments: pic20772.gif; pic26053.gif; pic19391.gif; pic29162.gif; pic27664.gif; pic06364.gif; pic23859.gif; pic06827.gif; pic17078.gif; pic26992.gif classification: Public Jeffrey, Rich and I spoke last week on USDCNH, and I wanted to send a recent piece from our research team on this topic. For full disclosure, I personally don't share our research team's recommendation, as USDCNH vol still extremely low and it represents a very cheap out-of-consensus expression of CNH out-performance vs. USD, so don't see the value of crossing bid offer on the transaction. Having said that, our research team advocates closing their USDCNH put spreads as they view "the next phase of FX depreciation will be driven more by china's own worsening fundamentals, namely: 1) slower growth and disinflation, (2) a pick-up in outflows, (3) de-leveraging that increases short-term risks and (4) valuations approaching expensive extremes" You could unwind you 575mm USDCNH put struck at 6.16 expiring on 12-Aug-2015 for 5270k bid (spot ref 6.1310 - the mid would be 5315k - pricing as of noon 11/03/2014) You paid S273k for it. more details on the research piece below. Best regards, Daniel Forwarded by Daniel Sabba, on 11/03/2014 11:49 AM Classification: Public china growth is facing increasing headwinds, with DB Economics downgrading our 2015 growth forecast to 7.0% this week. In this context, we believe RMB weakness will return to haunt the market in 2015. This weakness will be different from the early 2014 squeeze, which appeared to be engineered by policy-makers to target speculative capital. The next phase of RMB depreciation will be driven more by china's own worsening fundamentals, namely: (1) slower growth and disinflation, (2) a pick-up in outflows, (3) de-leveraging that increases short-term risks