Capitalist Roader Fund:
The Shanghai Composite Index (SCI) fell 0.8% this week. Two of the Capitalist Roader’s portfolio stocks followed suit: Huaneng Power (600011.SH) fell 0.5%, and Guangshen Railway (601333.SH) stumbled 1.1%. However, China COSCO (601919.SH) bucked the trend, increasing 2.4% as it floated on the same positive sentiments that lifted other Asian shipping firms.
Speculation continues over the timing and amount of a revaluation of the renminbi, but we think a revaluation would benefit all of our investments. We remain optimistic about the prospect of appreciation.
The Capitalist Roader Fund is down 34.7% from June 3, 2008. The SCI is down 8.9% from June 3, 2008.
Red Dragon Fund:
No trades this week. As we expected, the State Council introduced several policies regarding the property market in a meeting chaired by Premier Wen Jiabao on Wednesday.
However, some economists argue that the effectiveness of this new round of policies depends largely on implementation by local governments. We believe there is a chance for the housing market to peak in the coming months. What’s less clear is whether the economy as a whole (and the equity market in turn) will peak as the property bubble bursts.
Another big development was the introduction of stock index futures on Friday. If we look at the experience of most overseas markets, introducing index futures tends to make indexes drop initially, but rally in the long term. With the Shanghai Composite Index fluctuating, we’ve decided for now to wait and see.
The Red Dragon Fund is up 103.0% from August 19, 2005. The Shanghai Composite Index is up 172.1% 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.