Capitalist Roader Fund:
After the rally in mid-August, the wind has gone out of the sails of the Shanghai Composite Index. It was down about 1.5% at Thursday’s close, and looks set to post another loss today. Our purchase last week of soymilk-maker maker Joyoung (002242.SZ) isn’t yet paying off, but we still like the company – particularly as ongoing product quality concerns drive Chinese consumers toward safety-oriented purchases.
We had been hoping for a boost for China COSCO (601919.SH) from higher profits in the first half, but neither strong income nor expectations of stable shipping rates in the fourth quarter were enough for the market. The company’s shares are down nearly 4% this week.
The Capitalist Roader Fund was down 40.6% from June 3, 2008 at the market’s close on Thursday. The SCI was down 24% from June 3, 2008 on Thursday.
Red Dragon Fund:
Our "wait and see" strategy is paying off. The A-share market tumbled this week to once again test the 2,500-point bottom. We’re looking at some potential targets: Fengfan (600482.SH) and SAIC Motor (600104.SH) for new energy vehicles; Jiangxi Special Electric Motor (002176.SZ), Shanghai Tongji Science and Technology (600846.SH) for lithium/rechargeable cells; and Bank of Nanjing (601009.SH) and China Merchants Bank (600036,SH). We believe investors will see value in banks when the market begins to rebound. However, Beijing says that it won’t mitigate efforts to rein in the housing market, so we’ll be careful when choosing any investment.
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.