Capitalist Roader Fund
Investors in Shanghai aren’t feeling terribly optimistic these days, what with the awful, awful weather and new GDP data that showed growth slowing in the second quarter (although at an expansion rate of 10.3%, the country is hardly grinding to a halt). The Capitalist Roader Fund has sat through it all making it no trades – not so much inaction, we like to think, as a model stoicism. "Persevere in plain living and hard struggle, maintain close ties with the masses" and all that.
With our holdings being, by a large, macro plays, we had a predictably unpleasant week. China COSCO (601919.SH) hasn’t been helped much by talk of weaker commodities imports – it has fallen 0.67% since Monday morning – and Guangshen Railway (601333.SH) went off the rails this week to the tune of 3.27%. Huaneng Power (600011.SH) was the one not-so-bright light: It rose 0.16% over a week in which it announced electricity output rose 38% in the first half.
The Capitalist Roader Fund is down 41.9% from June 3, 2008. The Shanghai Composite Index is down 29.4% from June 3, 2008.
Red Dragon Fund
The slump on Thursday marked the end of a short-term rally, and through it all the Red Dragon Fund made no trades. We expect small-cap stocks to continue to be squeezed, and think the general market will take some time to embrace the bull – perhaps the middle of the third quarter. China Merchants Bank (600036.SH) forecast its first-half profit would grow more than 50% year-on-year, and we feel comfortable holding on to our holdings in the lender. Goldman Sachs recently upgraded Shanghai International Airport (600009.SH) to a "Buy," citing growing GDP and income levels, as well as an appreciating renminbi. We also expect the company to benefit from higher traffic due to the Shanghai World Expo.
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.