Capitalist Roader Fund:
What’s this? What’s this? A positive return, you say? For the Capitalist Roader Fund? The same Capitalist Roader Fund that lost nearly 44% over six weeks on a Hubei riboflavin producer? The same Capitalist Roader Fund that lost more than 40% on the country’s largest cement maker? (At least we got out – both companies have since fallen much, much further.)
Yes, we’re looking at a modest paper gain for soy milk machine maker Joyoung (002242.SZ), the company that built on consumer angst following the melamine-tainted milk scandal to launch its products in first-tier cities. They make a mean blender, too. At Thursday’s close, Joyoung was up 5.37% to RMB16.49 from our purchase price of RMB15.65, though it has since given up some of that gain amid a falling market this morning.
We said a few weeks ago that we were taking a new approach since a macro-focused strategy is doomed to failure (as we have proven time and again). Joyoung is a reasonably strong company with a good product in a useful niche, and has historically outperformed the index. We’ll be looking around for more like it over the coming weeks.
At Thursday’s close, the Capitalist Roader Fund was down 39.17% from June 3, 2008. The Shanghai Composite Index was down 22.7% from June 3, 2008.
Red Dragon Fund:
Month-on-month passenger car sales growth of around 15% in August gave auto makers a nice bit of support: SAIC Motor (600104.SH) rose 8.9% on Thursday. But the Red Dragon Fund is now taking a cautious stance. Average housing prices in Shanghai have reached a new record of RMB22,261 per square meter, which is likely to encourage Beijing to increase its control over the real estate sector.
Analysts are conflicted over where the market is going. Some believe that Thursday’s rise was mainly spurred by market rallies in Europe and the US. The risk of a significant correction is building.
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.