On this day last year, you will remember, the SCI closed at 5,272.814 points. In our January 2008 issue, we noted that institutional investors were convinced the market would rebound to 6,000, and maybe go as high as 8,000.
When we entered the market with our purchase of shares in Anhui Conch Cement (600585.SH) on June 3, the SCI was sitting at 3,436.398. Today, the index closed out the year with a snivel, dropping 0.66% to 1,820.81.
It was not a good year to enter the markets at all. The Capitalist Roader Fund was set up as an editorial exercise, but individual investments were made with what in hindsight appears to have been misplaced optimism. We can only say that in a market that has been as driven by sentiment as China’s, our investments seemed better thought out than many.
Faithful readers of the magazine will be familiar with the Red Dragon Fund, the A-share fund (our arch-rival) begun in August 2005 and run by a professional fund manager. We received word yesterday evening that the Red Dragon Fund had decided to end the year by selling a significant chunk of its holdings, based on a prediction of the SCI soon falling to 1,300.
You will have to wait for our February issue to learn more about the specific reasoning behind that forecast, but we at the Capitalist Roader Fund are a touch more sanguine about the prospects for the market. That’s not to say it won’t fall, but we don’t see the bottom falling out of the market so dramatically. In any case, we think it’s too early to make such a gloomy prediction.
As the market stops trading for the New Year’s Day holiday, it’s worth remembering that the government’s stimulus package has yet to properly kick in. If private sector activity fails to pick up in response to government investment as the first quarter progresses, you may see us joining the Red Dragon Fund in liquidating at least some of our holdings. But we like to think there is a light at the end of the tunnel that isn’t an approaching train.
Of course, our optimism has been misplaced before.
The Capitalist Roader Fund ends the year down 40.5% while the SCI has fallen 47% since June 3.