Capitalist Roader Fund
Jiangsu Expressway (600377.SH) was the lucky winner in one of the Shanghai market’s periodic bouts of speculation at the end of November. Orient Securities suggested that Disney’s planned Shanghai theme park might drive traffic along Jiangsu Expressway’s toll roads and the stock duly spiked. Never mind, of course, that the park will be smaller even than the lilliputian Hong Kong Disneyland, or that any possible windfall for the firm is years away.
Not wanting to be part of of the silliness, but wanting to take advantage of it, we sold, netting a respectable 12.87% return on our brief investment.
Unfortunately, neither China Vanke (000002.SZ) nor China COSCO Holdings (601919.SH) were the beneficiaries of similar speculation. Investors responded to COSCO’s profit warning with predictable concern, while Vanke slipped on fears of property bubbles and government policies aimed at countering them.
In retrospect, we should have sold when Wang Shi, Vanke’s chairman, said that bubbles already existed in first-tier cities, and could spread.
Red Dragon Fund
As predicted last month, the Shanghai Composite Index (SCI) spent much of December consolidating – and so PetroChina (601857.SH), as the index’s heaviest member, did likewise. But the company can look to other news for reassurance. An executive at the National Development and Reform Commission said that, although crude oil prices are heading down to around US$70 a barrel, there are no immediate plans to lower gas station prices.
This gives PetroChina a chance to build on its profits, but we don’t want to boost our holding in the company. Again, it’s an index-driven decision: We believe the SCI could slip to 3,000 points around the turn of the year.
The Red Dragon Fund continues its search for new targets in the environment sector. The stocks officially on our radar now include: nuclear power developer Shanghai Electric (601727.SH), wind energy specialist Xiangtan Electric (600416.SH), hybrid car manufacturer Shanghai Tongji Science & Technology (600846.SH) and jack-of-all-trades Invengo Information Technology (002161.SZ).
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