Capitalist Roader Fund:
We said last month that we would consider capitalizing on relatively positive economic news, and we were as good as our word. Taking note of China’s continued hunger for imported raw materials, the Capitalist Roader Fund moved into shipping with 100 shares of China COSCO Holdings (601919). We think the company’s strong bulk business will more than make up for weakness in containers.
So far, it has proven a decent investment, though the announcement the company would face a loss in 2009 may hurt its short-term prospects (then again, after three quarters in the red, the news was hardly surprising).
From trading at a premium last month, property developer China Vanke (000002) has moved to a slight loss after its October property sales fell 35% year-on-year. We’re not yet ready to reconsider our purchase, however, or our interest in holding onto a strong property play.
The same cannot be said for Jiangsu Expressway (600377), which has singularly failed to meet our expectations. It is a candidate for a likely sale in the near future.
Red Dragon Fund:
The increase in retail fuel prices in November is good news for PetroChina (601857), but our optimism doesn’t stop there: Natural gas price reforms are likely at the end of 2009.
Liang Yaowen, an analyst at China International Capital Corporation, expects gas prices to rise 10-20% in the short term and as much as 100% in the long term. As the leading supplier of gas – it accounts for 69% of national output – PetroChina stands to benefit considerably.
The A-share market as a whole has been consolidating recently, but we believe it will move soon. As the year comes to an end, institutional investors look to cash in some of their holdings in order to plump up their balance sheets. The Shanghai Composite Index may well fall to around 2,800 points.
With the Copenhagen climate change summit scheduled for early December, low carbon has become a hot topic among investors. The Red Dragon Fund is looking at companies with an interest in low-carbon transport, smart grids, biomass power and environmentally friendly construction.