Capitalist Roader Fund:
The Shanghai Composite Index (SCI) was battered at the end of the week by global uncertainty surrounding the Greek sovereign debt crisis and an unprecedented decline (and subsequent semi-recovery) of the Dow. The Chinese stock index fell 6.3% between Monday and Friday, while Huaneng Power (600011.SH) fell 3.2%, and Guangshen Railway (601333.SH) fell 4.2%. The worst performer of the week was China COSCO (601919.SH), which declined almost 5% on Friday alone, for a total decline of 4.2% for the week. Despite spending the week in comfortable waters of a Q1 profit increase of 126.4%, the shipping firm suffered as renewed concerns about the state of the global economy pushed down forecasts for international shipping.
With blood in the streets and continuing market instability, the Roader will wait until next week to see how far prices will fall, but we may have some bargain-hunting planned.
The Capitalist Roader Fund is down 38.8% from June 3, 2008. The SCI is down 21.8% from June 3, 2008.
Red Dragon Fund:
With the equity market dropping, the Red Dragon bought more China Merchants Bank (600036.SH) after its A-shares suffered several consecutive drops to the RMB13.30 (US$1.94) level. In contrast, the bank’s H-shares (3968.HK) are trading at HK$17.60 (US$2.26). We think the A-shares are undervalued, and make for a desirable trade for both the short- and long-term. We’ll make it a short-term trade, as there are still risks for the market overall.
We encountered a spot of bother with Shanghai International Airport (600009.SH) – we failed to sell it before market tumbled. We plan to sell if we see a rebound.
The Shanghai Composite Index has moved down to the 2,700-3,000-point range, which presents an opportunity for long-term investment. We expect a rebound soon, as the market has experienced several falls without any resistance, and equity prices are remarkably low.
The Red Dragon Fund is up 65.5% from August 19, 2005. The Shanghai Composite Index is up 133.7% from August 19, 2005.
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.