Capitalist Roader Fund: Overblown fears of tightening (Hold)

It was not a brilliant week for the Shanghai Composite Index (SCI), China COSCO Holdings (601919.SH) or the Capitalist Roader Fund. The SCI closed at 2,989.29 points today, its third consecutive close below 3,000 and down 8.78% for the week. Investors didn’t much care for talk of restrictions on bank lending, even if those restrictions have been blown out of proportion – they were intended to do little more than send signals to prodigal banks. We’re still in a loose monetary environment, and there’s plenty of liquidity to plow into stocks.

China COSCO did even worse than the market overall, falling 11.1% over the week to close at RMB13.05 (US$1.91) – never mind stronger imports and exports, and a statement from COSCO President Zhang Liang that this year will be better than last. We see the dip as reflecting market worries about tightening rather than any change in the company’s fortunes.

Some may criticize the fund for not making good on its promise of a new era of risky investments. Fair enough. Expect that to change in the coming weeks as the last of our prudent, if misguided, conservatism molts.

The Capitalist Roader Fund is down 34.5% from June 3, 2008. The SCI is down 13%.