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View the article online at http://citywire.co.uk/wealth-manager/article/a753553

Fidelity’s Dale Nicholls: beware China banks, but don’t expect Armageddon

by Robert St George on Jun 11, 2014 at 11:54

Hot property

Another source of anxiety for China bears is the country’s property market. ‘It is definitely an issue, but when I look at it relative to other property cycles, it doesn’t look that different to me in terms of how it gets dealt with,’ Nicholls reckoned. If anything, he felt China would be more resilient given the lower levels of consumer leverage than in the US before its property market crashed.

‘Although prices have moved up in a number of cities, so have incomes,’ explained Nicholls. ‘Affordability has been pretty stable or actually improved.’

He also dismissed claims that China was riddled with ghost cities. ‘You get extreme views, and the truth is probably somewhere in the middle.’ Nicholls recalled a recent visit to Zhengzhou, often cited as emblematic of the problem: ‘It’s not Causeway Bay in Hong Kong, but there is definitely activity.’

Nicholls took sole responsibility for China Special Situations on 1 April, but had been working closely with Bolton on the trust since 1 January. The manager has a longer track record on the open-ended Fidelity Pacific fund, for which he is Citywire rated.

Over the past three years the £890 million Fidelity Pacific fund has returned 20%, compared with 7.4% from its MSCI AC Pacific index. That is also top decile within its peer group, where the average fund has lost 1.7% through the period.

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