It’s been an interesting week for the markets, to say the least. The Shanghai Composite Index (SCI), which has spent most of the year seemingly impervious to doubts about the strength of the economy (not that there hasn’t been good news, just that investors seem to have ignored all the bad), finally showed signs of weakness on Wednesday. It fell 5% in a single day, its largest drop in eight months, on fears that Beijing might attempt to rein in bank lending. Given that the market’s rise has been fueled by that very lending, it’s not hard to understand why investors might have been nervous.
But that nervousness has been laid to rest (for now) thanks to comments from the People’s Bank of China to the effect that the government will maintain its moderately loose monetary policy (for now). The SCI made up some of Wednesday’s losses on Thursday, and as of the end of the week it’s almost back up to Tuesday’s close.
All this took place together with the resumption of domestic initial public offerings. China State Construction Engineering (601668.SH) had the world’s largest IPO so far this year, and the Shanghai trading debut of Sichuan Expressway (601107.SH) saw that company’s shares soar 200%.
Jiangsu Expressway (600377.SH), our single holding, did not benefit from an expressway halo effect around Sichuan Expressway’s trading debut, as we had hoped. Nor did it receive any encouragement from talk of further government investment in infrastructure in the second half of the year (or from reports that Chinese car ownership continues to explode). We’ll see what happens in the coming weeks.
The Capitalist Roader Fund is down 33% since June 3, 2008. The SCI has almost erased its losses: It is down less than 1%.