Standard Investment Bank (SIB) forex and commodities trading platform made a return of 24.45 percent in the three months to March on the back of asset price volatility in the global market in the wake of coronavirus.
In a brief to investors, SIB says its returns in Quarter One beat the Nairobi bourse index, which posted negative 25.9 percent return as foreign investors fled the equities markets across the globe.
Market volatility related to the coronavirus has provided a welcome boost to global trading businesses, providing opportunities to enter and exit assets within a short period while making capital gains.
SIB linked the returns to gains made from trading in crude oil and market indexes of global stock markets like the S&P 500 — the index that measures the stock performance of 500 large companies listed on stock exchanges in the US.
“The higher return is due to increased market volatility that created more trading opportunities with some asset classes making historic lows for example oil, which is now trading at an 18-year low,” said the notice from Mr Nahashon Mungai, head of global markets at SIB.
“Global stock indices also fell amidst the coronavirus outbreak and Mansa X which uses a long/short trading strategy was able to squeeze out returns by short selling the losing asset classes,” he added.
In short-selling, traders borrow a company stock or an asset like crude oil with a view to selling it, hoping to buy it back later at a lower price.
This means a firm can borrow crude oil assets at $46 a barrel and it eventually falls to $30, the borrower or speculator books the $16 difference as a gain.
“Unlike other traders who gain when assets prices increase, derivative traders gain when prices fall,” said Mr Mungai.
The Capital Markets Authority granted SIB the first money manager licence, which allows the firm to invest offshore in forex and commodities on behalf of clients in its product dubbed Mansa X.