Red Dragon Fund:
Finally, the rebound. The Shanghai Composite Index (SCI) sprung from around the 1,900-point mark, briefly eclipsed 2,300 at the end of September, and then sank back to its earlier level.
It was disappointing the moment didn’t last longer, but we should bear in mind that China’s equity markets have outperformed most others in the world for the past month.
We didn’t sell up because of the widely anticipated government support. More help could follow. J.P.Morgan predicts a possible dividend tax cut to bail out the market.
There is also reason for optimism concerning our holdings. China Unicom (600050) is tipped to be the major beneficiary of a government order that telecom operators share infrastructure – such as towers and cables – to avoid wasteful construction. It has also been reported that the State-Owned Assets Supervision and Administration Commission will transfer about US$7.3 billion from China Mobile to China Unicom.
PetroChina (601857), meanwhile, is enjoying the fall in crude oil prices.
We believe the stocks we hold have more or less bottomed out. We will look for some quick trades if the SCI falls below 1,800.
Capitalist Roader Fund:
It was a dismal month for global stock markets, but, perhaps surprisingly, not all that bad for the Shanghai Composite Index (SCI).
That’s not to say the market has been flat. The move by the China Securities Regulatory Commission to eliminate the stamp duty combined with Central Huijin’s investment in three state-owned banks to help the index shoot up 9.46% in a single day on September 19.
It’s been a rocky ride down since then, but the worst falls in the Chinese market predated the drops in global indexes.
Our fund has not been as flat. We’d hoped that infrastructure investment would keep cement prices up and give healthy profits to Anhui Conch Cement (600585). But the company’s forecast of lower cement prices in 2009 put paid to that hope.
As for Industrial and Commercial Bank of China (601398), we had been hoping for some quick gains by buying in on the news of Central Huijin’s investment. Unfortunately, we were too slow. The stock quickly rose by the 10% limit, locking us out.
