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Bolton's Fidelity China trust narrows to 5% premium
by Matthew Goodburn on Jun 21, 2010 at 10:20
(Update with new share issue) Anthony Bolton's Fidelity China Special Situations investment trust has issued a further 11 million of ordinary shares to meet heavy tracker fund demand for the vehicle as it listed on the LSE this morning.
The trust had seen its price spike up to trade on a 10% premium ahead of its entry to the FTSE 250 today but it has already narrowed to just over 5%.
The shares were issued at 100.1p on 18 June fully paid for as part of the firm's 45 million share block listing facility. They will be issued for cash on 23 June.
The new shares take the entire issued share capital of the trust to 471 million as of 23 June, and will leave it with 34,999,999 shares under the block listing facility.
Fidelity China Special Situations , which raised £430 million at its launch two months ago, had been trading at around net asset value (NAV) up until the recent spike as its imminent arrival on the mid cap index led to heavy demand from index tracker funds as the listing approached.
Broker Oriel Securities sees the short term spike as a significant trading opportunity, for investors looking to exit, noting that the trust's peer, JPMorgan Chinese , is currently trading at a 5% discount.
Oriel said the jump in the share price was down to technical reasons as investors piled in ahead of the trackers and it expects the trust to quickly revert to trade between parity and a 5% discount.
It points out that the trust's NAV has dipped significantly- after listing in mid April with a NAV of 98.9p it fell to a low point of 90.5p on 25 May, but had recovered by last Tuesday (15 June) to 94p.
Although Fidelity has not yet published any figures for Anthony Bolton's trust, Oriel believes the price reflects 'quite a sharp fall' in the NAV over a relatively short period of time, as the portfolio was 100% in cash at the time of listing.
In a note it said: 'We do expect the shares to fall back to trade on up to around a 5% discount fairly quickly. Investors should take advantage of the high premium to trade the shares and perhaps switch into the long established JPMorgan Chinese trust which is trading on a 5% discount.'
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