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AlphaShares Monthly Letter: June 2009

AlphaShares Indexes June 2009 2009 1 Year 3 Year
AlphaShares China All-Cap Index 3.57% 44.62% -6.78% 19.19%
AlphaShares China Small-Cap Index 0.96% 60.62% 2.81% 5.52%
AlphaShares China Real Estate Index 1.53% 63.76% 2.98% 11.44%
FTSE/Xinhua China 25 Index 4.81% 36.28% -10.83% 16.74%
CSI 300 (A-Shares) 14.7% 74.02% 13.84% 38.55%

The AlphaShares China All-Cap Index gained +3.57% in June. The World Bank raised its 2009 GDP Growth forecast for China to 7.2% from 6.5% (March), noting the success of the government issued stimulus package. Gradual improvements in export demand, robust expansion in domestic demand, and a strong rebound in industrial production have bolstered market confidence and sustained economic recovery in China.

The recent resumption of the A-Shares IPO market have some concerned about a liquidity shortfall, in actuality the total amount of approved IPOs will unlikely exceed 100 billion CNY, versus average monthly A-Shares trading turnover of 3.5 trillion CNY—a drop in the bucket.

Chinese companies continued to flex their muscle abroad in a pair of large international deals. Chinese oil giant Sinopec (386 HK) made a $7.22 billion bid for the Canadian oil and gas exploration company Addax Petroleum (AXC CN). Also, little known Sichuan Tengzhong Heavy Industrial Machinery (Private) agreed to buy the Hummer brand from bankrupt General Motors (GM US), though many expect the deal to be rejected by China’s top economic planning agency.

After numerous global technology companies (including Dell & HP) submitted a letter to Chinese Premier Wen Jiabao to urge the government to scrap its Green Dam internet-filtering software, Chinese officials agreed to forestall its plan to require all new PCs to be preloaded with filtering software. However, the delay was much more likely due to accommodate Chinese computer retailers (who were ill prepared to install new machines with the Green Dam software by the July 1st deadline), than it was due to appease the global computer suppliers. US trade officials are threatening to bring the matter to the World Trade Organization.

As global volatility continues to ease, China’s volatility, as measured by the AlphaShares Chinese Volatility Index (CHIX 35.57) remains high relative to the S&P 500 volatility index (VIX 26.35), closing the month at a 29.29% premium.

Jonathan J. Masse, CFA Dr. Burton G. Malkiel
Senior Portfolio Manager Chief Investment Officer

Disclaimer text

Past performance is no guarantee of future results. The information presented in this letter is for background purposes only and is subject to updating, revision and amendment, and no representation or warranty, expressed or implied, is made, and no liability is accepted by AlphaShares, LLC in relation thereto. This letter is neither an offer to sell nor a solicitation of any offer to buy interests in the Fund. Any such offering is made only pursuant to the Fund’s Private Placement Memorandum and subscription agreement, which should be read in their entirety. No offer to purchase shares in the Fund will be accepted prior to receipt by the offeree of the aforementioned documents and completion of all appropriate documents. These materials have been sent to you in a confidential manner. The information contained herein may be proprietary. No part of these materials may be reproduced in any manner without the Investment Manager’s prior consent.