Fidelity’s Anthony Bolton: My Thoughts and Views on China
Hong Kong, 15 July 2010 – China remains one of the most promising investment opportunities of the next decade – its economic growth drivers are shifting and future growth will come from domestic consumption rather than exports whilst at the same time it’s also entering its S-curve phase in its development when many areas will show rapid progress over the next ten years, said President of Investments for Fidelity International, Anthony Bolton.
Anthony Bolton relocated to Hong Kong in April 2010 to manage a fund listed in the UK. He started investing in China six years ago and since his arrival, he has visited over 150 Chinese companies. He works closely with Fidelity’s Team China, a group of portfolio managers, analysts and research specialists that have been investing in China and China-related opportunities for the past 16 years.
China remains the investment opportunity of the next decade:
“Recent macro indicators point towards slowing growth globally as the sharp economic recovery seen after the recession is losing momentum. In China, the tightening process that started late last year is also slowing the economy although growth is still well above that being seen in developed markets. In a low growth environment the high relative growth being experienced in China is increasingly attractive to global investors.”
First impressions of Chinese companies:
“Many of the companies with which I have met tend to be relatively under-researched, especially the medium and smaller sized ones. Generally, balance sheets are much stronger than I expected with many companies often having net cash positions. Combined with the fact that Chinese authorities like to create ‘champions’, this will provide positive opportunities for investors over the longer term although corporate governance and policy risk are still concerns within some companies.”
My investment thesis:
“I prefer to invest in two broad categories of companies: those that have the ability to grow significantly over the next 10 years where valuations are generally higher than Western equivalents but often not at a significant premium, and medium to small sized companies with reasonable growth potential where valuations are very often below their Western equivalents.”
Risks of investing in China:
“There is a risk that the government’s tightening measures could lead to an increase in bad debts at the banks and the downturn in the property market could get worse if restrictions on speculative activity remain in place longer than is necessary. I am also concerned about the large public debt at the local government level. Finally, with the pace of urbanization, social unrest continues to be an issue to watch.”
“The ‘A’ share market has been in a 12-month bearish phase, domestic manager cash positions are high and flows into China by international investors have been weak for sometime so this bodes well for a more positive market cycle. Unlike most of the West, China’s government does not need to reduce expenditure or raise taxes. They are likely to loosen policy later this year which should present a more favorable macro-environment for many Chinese companies. In addition, a gradual appreciation in yuan is likely, which presents an opportunity for foreign investors.”
“I am positioned to take advantage of the structural changes that I believe are taking place in China. I am positive on a number of retailers such as department stores and sports goods retailers, electrical goods, shoes and jewelry producers and other areas driven by consumer spending such as wine and spirits, restaurants, hotels, automobiles, telecom and internet. I also like financial stocks that include banking, insurance, brokers and real estate agents as well as several pharmaceuticals stocks. I prefer Chinese stocks that are listed in Hong Kong and the US but also like some Chinese ‘A’ shares as well as some Chinese stocks listed elsewhere.”
About Fidelity International
Fidelity International is an affiliate but separate company to Fidelity Investments and provides investment products and services to individuals and institutional investors outside of the Americas. Fidelity International has been in Asia for 41 years with offices in Japan, Korea, Australia, Hong Kong, Taiwan, Singapore, China. Fidelity International manages US$215.9billion Assets Under Management (as at 31 March 2010), has over 6 million customer holdings and manages 770 funds. Fidelity International has one of the largest proprietary research teams in the world, providing insights into around 98% of the world's stock markets (as measured by the Morgan Stanley Capital International World Index, 4 June 2010).
Tel: 852 2629 2800
Tel: 852 2629 2800
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