|AlphaShares Indexes||Apr 2009||2009||1 Year||3 Year|
|AlphaShares China All-Cap Index||14.13%||18.52%||-35.15%||10.73%|
|AlphaShares China Small-Cap Index||19.89%||26.12%||-29.96%||-4.72%|
|AlphaShares China Real Estate Index||19.39%||22.95%||-37.47%||-1.08%|
|FTSE/Xinhua China 25 Index||12.05%||12.28%||-37.76%||8.85%|
|CSI 300 (A-Shares) in USD||4.75%||44.30%||-32.14%||38.01%|
The AlphaShares China All-Cap Index gained +14.13% in April. While all sectors posted positive returns, we were pleased to see Consumer Discretionary lead the pack as the best performer, (+23.5%) for the month, followed by IT (+22.4%) and Materials (+18.6%). Like the prior month, Telecom was again the worst performing sector and continued to weigh on index returns gaining only (+2%) on the month. China Mobile slipped (-0.30%) in the month in which it announced its plan to take a 12% stake in Taiwan based Far EasTone.
Despite China’s economy expanding at its slowest pace in almost a decade (6.1% from 6.8% in Q4’08), a surge in industrial production, as government spending poured into state-owned enterprises (SOEs), was among the signs for many that China’s economy may have bottomed. In addition, the China Mobile/Far EasTone deal gave indications that the political risk between China and Taiwan is lessening and represents a breakthrough in the ever-warming cross-strait ties. Hopes of future/improved cooperation and an unwinding of previous constraints may lead to a powerful and positive feedback loop, generating economic synergies and financial flexibility between the two countries. Improved China-Taiwan linkages may lead to both higher profitability and lower equity risk premiums going forward.
China volatility as measured by the AlphaShares Chinese Volatility Index (CHIX 45.4) remains high relative to the S&P 500 index volatility (VIX 36.5) closing the month at a 24.3% premium. Both volatility indices are down from their respective March levels of (CHIX 52.5) and (VIX 44.1).
|Jonathan J. Masse, CFA||Dr. Burton G. Malkiel|
|Senior Portfolio Manager||Chief Investment Officer|