Capitalist Roader Fund:
The Shanghai Composite Index (SCI) has corrected again as investors became worried about pending increases in interest rates by Beijing. This pushed the SCI down to close at 2,888.57 Friday afternoon. There’s a lot of turbidity in the market at present, but we are contemplating a move soon to capitalize on the downturn in sentiment. One candidate is China Oilfield Services (601808.SH), a subsidiary of CNOOC (CEO.NYSE, 0883.HK) which is ready to make more money off of increased drilling productivity.
Like the market, the fund mostly fell this week – China COSCO Holdings (601919.SH) posted the largest relative decline to the SCI, now down by around 4.62% this week. Huaneng (600011.SH, 2883.HK) got off more lightly, declining by only 1.62% compared to the SCI’s 3.62% weekly drop. Joyoung (002242.SZ) continues to be our portfolio star, actually posting a 3.62% gain.
At the market’s close on Friday, the Capitalist Roader Fund was down 38.74% from June 3, 2008. The Shanghai Composite Index is down 15.94% from June 3, 2008.
Red Dragon Fund:
With the SCI plummeting by 300 points in three trading days, SAIC Motor (600104.SH) tumbled to as low as RMB17 before closing above RMB18 on Thursday. SAIC said on Thursday that it plans to invest around US$500 million for a 1% share in its partner GM’s IPO. The government approved, and SAIC shares continued to recover on Friday to close at RMB18.21.
Transforming to a bear from a bull, China International Capital Corporation (CICC) argued on Wednesday that the A-share market may be subjected to continuous downward pressure, and predicted it will gve up its recent gains. But we think CICC is mostly trying to frighten retail investors into cashing in their chips. CICC warned the market not to underestimate the impact from upcoming tightening measures; we would like to remind it not to underestimate the sheer amount of liquidity that is retreating from the housing market.
The Red Dragon Fund launched in August 2005 and is run by an industry professional. The Capitalist Roader Fund launched in June 2008 and is run by China Economic Review’s editorial team. Both funds are run solely as an editorial exercise.