China ETFs, Tech Stocks Looking Plungy

The bottom chart is the 3X Daily Inverse China fund, YANG.

Here are some tech-related China stocks listed in the U.S. Alibaba (BABA), CTrip (CTRP), Fang Holdings (SFUN), Weibo (WB) all display topping patterns, Jingdong (JD) and Netease (NTES) already breaking down.

China mircoblog wars

In China, competing Twitter-like services are known as 微薄 (wéibó), which literally translates as micro blog. A Twitter knockoff named Fanfou (饭否) was shut down during the Xinjiang riots last year and to the best of my knowledge, it lost its first-mover advantage. Sina (SINA) appears to have taken the lead, with 56% of the microblog market. It's service was running off of its Sina.com domain, but this week it launched Weibo.com to give the service its own identity.

Tencent (0700.HK) has also stepped into the market though, and it is a heavy hitter. It's QQ messaging service is a monster, with over 600 million registered users and concurrent users peaking at over 100 million. It also offers music, streaming TV and movies, games and more through the platform. It also has social networking services and has now added microblogs. Tencent basically offers everything you can imagine and more, although it seems many of the components are not most popular.

Tencent isn't the only competitor. NetEase (NTES), Sohu (SOHU) and Baidu (BIDU) are among those looking to take market share. One battle tactic is the capture of celebrity microblogs, who attract millions of followers.
China’s Microblogging Celebs Blow Past Western Stars
Rumor: Baidu to Overhaul Microblog Platform, Poach Celebrities

Here is an in-depth Chinese article covering the topic: 微博之战——争夺中国人的“意见”与“关系”

May Performance

_____________May %_____YTD %
Indexes
S&P TR_______5.59______2.96
EAFE________11.09______6.46
SSE上海______6.27______44.60
My Funds
GreenDr_____6.71_______23.65
Pharma______5.56______2.44
Yield________11.99______11.71
Software_____8.33______19.42
Entert_______4.78______12.64
Best_________6.80______15.10
Short_______-14.40_____-34.33
China________0.92______5.71

Changes in May:
I had to sell positions out of the short fund to keep positions below the 10 percent limit. The fund is loaded up on the garbage that shot higher the past three months, click the link to see a chart that looks like Everest.

In the Best of Funds, I closed shorts on oil, gold and real estate, and entered shorts on U.S. long-term treasuries. I also increased the cash portion of the portfolio to the limit of 35 percent. Considering the short hedges I had in place, and the large cash position that was over 20 percent to begin the month with, the 6.80 percent return versus 5.59 percent for the S&P 500 Index is an acceptable performance, but considering the strength of gold mining stocks last month, I suffered for my heavy defense.

In the Software portfolio, Netease (NTES) added more than 10 percent for the month and has grown to the limit of 25 percent. I had to trim the position to stay within the rules.

In the China fund, I went short on Chinese SOEs again, with ProShares UltraShort FTSE/Xinhua China 25 (FXP). That plus a heavy cash position and defensive holdings kept the month's return to 0.92 percent. Over the past 90 days, the portfolio has paced the market, so last month's under performance notwithstanding, I should be alright as long as I don't sit out the next bull market.

More Chinese Gaming News

It's been a volatile week for these stocks, and big news came yesterday when The9 lost its bid to renew the license to operate World of Warcraft. Netease won the right to operate the game for the next three years after the current contract expires. Here's a comparison of the two, plus Shanda, over the past three months.

Shanda Hits All-Time Intraday High

Shanda Interactive (SNDA), a stock I've owned since 2004, just hit a new all-time intraday high at close to $46 per share. The last time it traded that high was late December 2004 and early January 2005. The stock has gone on a tear this year, up about 35%—similar to the mainland market, though they have not traded in tandem.

There's a lot of interest in Chinese internet gaming stocks, with Sohu.com's (SOHU) spin-off of Changyou (CYOU).

At least as of 1 PM, Shanda's 7% intraday move was not replicated by its competitors. The9 (NCTY) was down 6.62% as of this writing.

Update: Shanda closed at an all-time high. It finished the day up 5.7% to $45.07, on double the 3-month average volume.

January Fund Performance

Here's the January performance of my Marketocracy funds. The orange line is my fund, the purple line is the M100, the Marketocracy mutual fund, green is the S&P 500 Index, brown is the DJIA, and blue is the Nasdaq.

First up is my short fund. I've loaded up on financials, newspapers and solar. A surprise winner was FXP. The double short China fund from ProShares, even though the Chinese market has fallen, the inverse ETF went down as well. It's easy to make money shorting in this market though, and if you look at the chart since inception, the performance was bad during the bull market.












Next is my Entertainment fund, which is mostly consumer discretionary. I haven't traded this hardly at all in the past year. A chart from inception shows the gains from holding Marvel Comics (MVL) was slowly bled away over time. Now that this is one of the worst sectors in the market, the fund continues to underperform. Also, I haven't sold losers, with several holdings down 80- and even 90-plus percent.












Here's my Software Security fund. The turnover in this fund has never been much due to the limitation of the sector. Even then, I've had to branch into Indian outsourcing, Chinese gaming, and defense contractors.












Next is the Pharma & Dogs. I've maintained the pharmaceutical allocation, with about 50% in healthcare. My Dow stocks aren't Dogs though, I have Caterpillar and Johnson & Johnson. One holding that delivered big gains is Tesoro (TSO), which I have in several funds. It's up 127% since purchase on December 5.












This is my high-yield fund. This portfolio also has Tesoro, which is up almost 100%. It yields 2.3% now, but was over 4% at the time of purchase. The biggest loser in the portfolio is HTE, down 44% and yielding 33% (although I don't expect that to last).












Next up is the Green Dragon. If I read about a stock in someplace such as Barron's and I think it looks good, I'll add it to this fund. Thus, this is my "gut check" fund. Little portfolio management. At the moment, over 50% of the fund is in U.S. dollars (cash) and Japanese yen (FXY).












This is my Best of Funds. It has also performed the best of all my long funds. I trade this fund heavily (turnover was 31% in January) because I move in and out of double short stock and commodity funds.












Finally, the fund that fits with this blog's title, the China fund. Over 60% of the fund is defensively positioned in currency positions and gold. The largest Chinese equity position is currently Netease (NTES). The fund lost 4.06% last month, compared to more than 13% for iShares FTSE/Xinhua China 25 (FXI).