Top U.K. fund manager Anthony Bolton says he’s expecting a rebound in Chinese growth next year.
Bolton tells Investment Week that he thinks China’s growth has actually been slower than the official 7.5% figure being cited this year. “The headline figure is not reliable and I think growth has come down below that this year,” he says. But he sees better growth in 2013, and says that economic improvements and the fact that China’s elections are over should help spur Chinese stocks next year.
“The bear market will change soon in the A share market,” he said. “The economic cycle is now in its favour, as is the political process.”
Sectors that Bolton was high on in 2012, including healthcare and consumer discretionary stocks, struggled. But he’s sticking with them heading into 2013, expecting that the changing conditions will lead to bounce-backs.
While many investors are fleeing Chinese equities, Fidelity’s Anthony Bolton remains bullish.
“People are generally cautious and are taking money out of China which, as a contrarian, I see as positive,” Bolton says, according to Investment Week. Bolton, who compiled an exceptional fund management track record in the U.K. before moving on to a China fund a couple years back, says that local, private Asian investors generally have most of their money in cash on deposit, and little in bonds and equities. “It is this money that will drive the market when the market turns,” he said. “People are not positioned for markets to go up, which is usually when they do go up.”
Bolton says the valuation picture is very good in China. “Valuations are really supportive at the moment — the valuation case for China is as good as I have seen it,” he said, adding that in terms of forward earnings, China is “off the scale,” Investment Week reported. He also thinks inflation will fall below 2% in China this year, meaning that policymakers may well act in ways that bolster equity prices.
Top U.K. fund manager Anthony Bolton thinks that China’s economy is better than many realize, and is particularly high on the country’s consumption and services sectors.
“We have been through an extraordinarily volatile year but I believe that when the dust settles and things calm down, investors will focus on relative growth rates they can get in different parts of the world,” Bolton tells FTAdviser.com. “I feel very strongly that this will result in money flowing out of developed markets that have sovereign debt problems and very mediocre prospects over the next few years into the faster growing emerging markets like China.”
Bolton, who compiled one of the best long-term fund management track records ever but has struggled over the past year as Chinese equities have tumbled, thinks the tide should turn in the next year. “The next 12 months should be a defining moment for Chinese investment when investors realize the economy is not about to collapse and the tightening period is over,” he says.
Bolton says China’s growth rate should slow down, but will still remain very attractive relative to other areas of the world. He’s particularly high on the consumption and services areas of the Chinese economy. His concerns include the residential property market, and potential political changes that may occur in the next year-and-a-half. He’s underweight exporters, commodities, infrastructure companies, banks and property companies.
Fidelity’s Anthony Bolton says he’s optimistic about global equities, and valuations are a big reason.
“I am still a bull of world equity markets,” Bolton, who produced an exceptional track record in the U.K. and now oversees a China-focused fund, said at an Investment Week conference. “I think in this business you have got to look at what is discounted in valuations, not at the outlook. A very cautious view is discounted in valuations at the moment. But I do not think we ever got into [the phase of] overvaluation in the bull cycle.”
Bolton sees a bifurcated world in terms of economic growth prospects. “I think everyone now realises there will be below trend growth in the US and Europe for the next few years,” he said. “The relative growth in emerging markets is going to look particularly attractive in that environment.”
Bolton also says he’s as high on China as he’s ever been, and lays out some of the reasons he thinks the country can overcome problems like inflation.
Top U.K. fund manager Anthony Bolton says the recent tumult in global markets has created a buying opportunity in Asian markets.
“I believe the recent stock market volatility reflects a familiar pattern during this bull market of short, but often very sharp set backs, within a bull trend,” Bolton says, according to the Financial Times. He says he thinks a bull market will resume shortly in Asia.
Bolton also says the declines make many developing markets even more attractive for investors. “This makes the case for exposure to developing markets and particularly those of Asia even more compelling where growth rates by comparison — even though they are slowing — will still be very attractive. History shows that normally extreme equity market volatility, as we are now experiencing, should be seen as a time of opportunity rather than a time to become more defensive.”
While his China-focused fund has struggled in its first year, top U.K. fund manager Anthony Bolton says he’s sticking to his general approach — with some modifications — and continues to think Chinese stocks are packed with potential.
“I am pretty confident in the general approach,” Bolton tells The Telegraph. “I said before the fund was launched that I think the drivers of Chinese growth are changing and the areas of future growth will be different from those of the past. I’ve tried to focus on those areas which are domestic consumption and services orientated. I feel even more strongly that this is the case after the last year. My view is that Chinese stocks will go up.”
One way Bolton is adjusting his strategy, however: portfolio size. Before the launch of his fund, he thought he’d be holding about 60 stocks, he says. Now, he has about 120. “The number will come down a bit, but I think my original thoughts were wrong,” he says. “It’s going to be higher than 60.”
Anthony Bolton, one of the U.K.’s top fund managers, says he thinks the bull market in equities has a ways to go, and says the bull is now in a phase in which growth stocks should fare well.
“I think we are in a multi-year bull market,” Bolton told InvestorDaily, an Australian subsidiary of Morningstar. “The first phase of that finished earlier this year and we then had a decent consolidation like many bull markets have.”
Bolton says the first phase saw cyclical, low-quality companies — which were hit hardest during the financial crisis — fare best. Back around the end of April, the bull entered a second phase, he says. “In this next stage and in a low-growth world I believe what investors are going to be turned on by and pay for are companies that can grow in a low-growth environment or regions or countries, so I expect them to pay up for growth and I expect that growth to get quite overvalued,” he says.
Anthony Bolton, the highly successful U.K. fund manager who came out of retirement this year to take over a new China-focused fund for Fidelity, is particularly keen on smaller Chinese firms.
Bolton recently told Dow Jones Newswires that small- and medium-sized businesses (those with market caps under $5 billion) tend to be under-researched in China. “[Their] balance sheets are much stronger than I expected with many companies having net cash positions,” Bolton adds, saying that such firms often have reasonable growth potential and are cheaper than their Western counterparts.
Bolton likes Chinese consumer stocks, including those in the retail, hotel, mobile phone, and media industries, as well as financials, electrical distributors, gas distributors and investment companies that are selling at significant discounts, Dow Jones reports. He is avoiding commodity and heavy industry stocks. Consumer stocks are attractive in part because China is in a “sweet spot” on the “S-curve” — the stage of economic growth in which population rises steadily but consumption increases rapidly, Dow Jones explains. China’s retail and service sectors are expanding rapidly, with middle-class Chinese spending more on items like branded clothes, food, and cars.
Bolton also discusses China’s future growth prospects, and why he thinks the country is becoming increasingly attractive for investors.
Top U.K. manager Anthony Bolton of Fidelity is managing a new China-focused fund, and he recently told London’s Telegraph why the opportunity lured him out of retirement.
“This may be the biggest economic and investment story of our generation,” Bolton says. “I believe that China’s economy could expand at nearly 8% a year between 2011 and 2020, and by more than 5% a year over the subsequent 10 years. The sheer scale of China, with its population of more than 1.3 billion, means the world may never have seen anything like the economic transformation of China that lies ahead.”
While China and Chinese stocks have gained a lot of attention in recent years, Bolton says global stock markets still don’t reflect China’s economic presence. “At the end of 2009, China represented only about 2% of the total capitalisation of global equity markets,” he said, even though it is one of the three largest economies in the world. “A combination of new issues and market growth will, I believe, lead to China’s stock market becoming the world’s second largest within the next 20 years.”
Fidelity’s Anthony Bolton, one of the U.K.’s most successful fund managers before retiring in early 2008, is putting retirement on hold as he tries to take advantage of what he says is the “opportunity of a generation” in China.
Bolton is starting a new fund focused on companies exposed to Chinese consumer growth, The Wall Street Journal reports. “He points to studies that show consumers in emerging economies launch into a new phase of purchasing when per-capita gross domestic product hits $4,000 to $5,000,” a level China is expected to hit in 2011, the Journal reports.
“As average incomes pass this key threshold,” Bolton says, “you get a big growth in the group that can afford to make the purchases of cars, apartments, etc., and that is where China is today. He also said that China’s government gives it an advantage over more democratic countries. “It’s happening with a centrally run economy at the same time where things get done where often in other economies they get bogged down in politics,” he said.