Capitalist Roader Fund:
The Shanghai Composite Index (SCI) has spent another week muddling about in the 2,600-2,700 point range, where it has mostly existed since the end of July. It briefly rose above 2,700 points on Tuesday, but the momentum simply wasn’t there to sustain it. Investors are still waiting for some big policy news to decide where to park their money – or whether to flee for the hills.
Soy milk machine maker Joyoung (002242.SZ) continues to trade at a slight premium to its price on August 20, when we bought in. At the market’s close on Thursday, it was up 4.15% overall, to RMB16.30. Huaneng Power (600011.SH) has been basically flat over the week. We don’t think there’s much good news ahead this year for Huaneng or other power producers: There have been reports over the last month or two about provinces temporarily cutting power to local industries to meet energy efficiency targets; that could directly affect power producers’ revenues.
Meanwhile, worries continue at China COSCO (601919.SH) over whether a container ship capacity glut could overwhelm a recovery in demand for bulk-shipped commodities. COSCO was down 0.3% from Monday at Thursday’s close.
At Thursday’s close, the Capitalist Roader Fund was down 39.5% from June 3, 2008. The SCI was down 22.6% from June 3, 2008.
Red Dragon Fund:
It’s all about property. The general market keeps fluctuating, waiting for Beijing’s next step to counter the property market. Banks and home builders tumbled on Thursday on news that some central bodies wanted to accelerate the deployment of a property tax. We are waiting for new policies from Beijing as well.
Although it is rumored that Shanghai will be the location of a pilot property tax, the central government has been effectively silent on when and where such a tax will be introduced.
Beijing has finally defined the seven strategic emerging industries that it will support with special funds: energy saving and environmental protection; high-end equipment manufacturing; biotech; new materials; new-energy cars; alternative energy; and advanced IT. Taking safety as our priority in a market without a clear trend, we’ll be looking for opportunities in these industries in the coming days.
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.