We’ve never had much of a soft spot for Industrial and Commercial Bank of China (ICBC, 601398.SH). Back in January, we even went so far as to call it a “hussy,” which may not have been an accurate description of China’s largest lender, but certainly felt good to write.
Our dislike of ICBC comes not just from the fact that it is a boring stock, but because it stands in the way of our fund’s ultimate goal. The Capitalist Roader Fund was established last year with the challenge of outperforming the market. Something as heavily index-weighted as ICBC was never going to help much in that regard. Its stock price muddles along, exhibiting only delayed and dampened effects of market rallies and falls.
The outlook for the economy, as most non-cave-dwellers are aware, is less than ideal, and we’re seeing few signs of a quick turnaround. After an unsurprising NPC-related market boost on Wednesday, we began to think seriously about selling ICBC. After it rose again yesterday, we made up our minds.
The NPC has been typical in its lack of real news. There have been no secret stimulus measures unveiled, and no inspired new government programs guaranteed to bring the economy back to its feet. Understandably so – this is not a downturn that lends itself to quick fixes, and Wednesday’s rally was based – as is usually the case here – on hopes and wild expectations, not reality.
As even optimists appear to have given up on the first half of 2009 and put all their bets on a second-half recovery, it seemed foolish to hold onto a stock so closely tied to the performance of the wider economy. Things will improve at some point, but with a post-NPC boost unlikely and the near-term outlook grim, we’ve decided to exit the market for now by selling all 200 shares of ICBC.
The fund is down 33% since June 3, 2008, while the Shanghai Composite Index is down 36%.