It’s not the first time we’ve fallen victim to taking a sensible macro view in a market that seems set up to punish anything other than speculative gambling. It could be argued, of course, that this is true of any stock market, but the vagaries of China’s retail-investor-heavy exchanges make our approach particularly doomed to failure.
We thought last week that Friday’s fall was a brief blip, and that the time was ripe to make an index-heavy property move. That we did on Monday, with the purchase of 100 shares of property heavyweight China Vanke (000002.SZ) at RMB11.91 (US$1.74). We had seen the company’s shares fall 7% soon after the mid-day break, and figured it would be a good time to move.
It was not. Vanke’s shares fell another 3% or so by the end of the day as the Shanghai Composite Index (SCI) fell nearly 6%, its steepest drop in months. While recovering somewhat over the week, Vanke is still down 4.79%.
Jiangsu Expressway (600377.SH) also got hit – though not as badly – and also recovered slightly. It’s now down 10.08%.
Overall, the Capitalist Roader Fund is down a bit more than 35% since June 3, 2008. The SCI is down 13.8%.
While watching the market this week, we came across something rather curious. Panda Fireworks (600599.SH), the company behind the fireworks display at the Beijing Olympics and China’s only listed fireworks maker, has been, well, on fire. Apropos of nothing at all, Panda has seen its shares rise nearly 40% this week. The company is said to be in the running for providing fireworks for opening ceremonies of the 2012 London Olympics, and may also provide the pyrotechnic display for this year’s National Day celebrations, but at this point it’s just guesswork.
To make it perfectly clear, the rise has been fired purely by speculation. No news or even shadowy Deep Throat-style fireworks informants are to be found. And yet, retail investors have bid up the company’s share price to 161 times earnings.
Also doing well has been another Panda: Nanjing Panda Electronics (600599.SH) up 10% each on Thursday and Friday. This suggests a new investment strategy: Buy anything with pandas. It can hardly be worse than the one we’ve been employing to date.