Fidelity fund manager Anthony Bolton has backed Asia to come out of its bear market and predicted China will see growth of 7% in 2013.
Bolton (pictured) said he was aiming for a ‘decent return’ for the Fidelity China Special Situations investment trust in 2013 after a tough 2012.
‘Asia has been in a bear market for three years and I think that’s going to change soon because the economic cycle is in its favour,’ he said. ‘Some of the things that worried people will become less worrisome. Valuations are very low and sentiment is very negative, but at least we know now, for example, who the new leader will be.’
‘Performance has been tough….it’s been a down market, the bias to small and mid-cap stocks. Consumer-related stocks have been underperforming in the slowing of the economy. It’s tended to be the defensive payers globally that have done better, although this will change next year.’
He added that his gearing of 26% had also acted against him in a down market.
Bolton said he saw encouraging signs which suggested growth and stabilisation in China.
‘Lending prices are up in the last couple of months so most of the economic data suggests stabilisation and a return to growth,’ he said. ‘In the medium term I see lower growth in China, but higher quality growth, instead of growth due to infrastructure, which is good when you have it but causes problems further down the road.’
He predicted 7% growth in China next year, and said real inflation was closer to 4%.
‘The days of real GDP growth at more than 10% are over and if you listen to the new politicians that is what they are saying, they want growth but more stable growth,’ he said. ‘The wage increase has been quite high: that benefits consumer expenditure and is one of the things that stops inflation getting too low.’
Bolton said he was interested in trends such as shale gas drilling in China, healthcare, IT and consumer services and property.
Recent purchases include a 2.3% stake in Alibaba, an internet company that Fidelity private equity has been invested in for over 10 years, and 21 Vianet, which owns internet servers and is the biggest independent provider of data storage in China.