Capitalist Roader Fund:
The abbreviated month was not a bad one for the Capitalist Roader Fund. Rather than taking any particular action, we decided to ride out the post-holiday high to attempt to reclaim some value from our holdings.
As of October 19, property developer China Vanke (000002) was in fact trading at a 3.18% premium to its purchase price. "Trading at a premium" is not a phrase we’ve had much occasion to use in the past. Vanke was helped by the news that its sales values grew 29.6% in the first three quarters of the year, while September revenues were up 27% year-on-year. With cash rolling in, it seems investors are rediscovering their faith in the prospects of China’s property sector.
Jiangsu Expressway (600377) has generally failed to perform as we had expected; a few high-profile sales of the company’s Hong Kong-listed H-shares may have dampened enthusiasm for A-shares.
So, where next for the market? Relatively positive economic news has us thinking that there may be an upside in the next month, and we hope to be able to capitalize on it.
Red Dragon Fund:
Crude oil prices have crept up to above US$75 per barrel, reaching a one-year record high of US$75.39. Analysts agreed that this was good news for PetroChina (601857), which remains the Red Dragon Fund’s most significant holding.
Galaxy Securities increased its 2008 earnings per share (EPS) projection to RMB0.70 for this year and RMB0.90 for 2010. This revision is based on an expected EPS of RMB0.43 for the second half of 2009, far stronger than in the first six months of the year.
All in all, it justifies our faith in the solid fundamentals of our investment in PetroChina. However, we do not plan to add to our current holdings, as we are now focusing more on small- and mid-cap stocks that exhibit strong growth potential.
We also engaged in another short-term speculative trade. Hoping to take advantage of the tourism activity that is a hallmark of the National Day vacation, we bought Huangshan Tourism (600054). However, we didn’t see the expected rally in the pre- and post-vacation trading days. Unwilling to hang around for a revival, we sold at a tiny loss.
