Bolton fully invested and tips bull market to resume later in year

Anthony Bolton’s Fidelity China Special Situations trust is now fully invested as the manager expects a resumption of the bull market later in the year.

Bolton says the sharp recent falls for equities is a normal consolidation phase that follows the first leg of a bull run and believes China could lead the global markets as it did during the recovery from the 2008/09 lows.

While the trust’s share price and NAV have fallen to 98.5p and 90.5p respectively, Bolton remains upbeat on the prospects in the region.

“It is disappointing that the net asset value and share price are in the short-term below the offer price but I believe the longer term case is strong,” Bolton says.

He says the trust, which had 24% cash at the end of April, is now fully invested. Bolton believes the current weakness in markets is providing the opportunities to purchase shares in some less liquid names at attractive prices.

“I have been travelling extensively in China since my move to Asia to meet management teams, visit over 150 companies, see factories and retail outlets and interact with Government officials and independent consultants in order to find the best companies for the portfolio,” Bolton says.

“These visits have reinforced my view that these markets are less developed and less researched than say the European markets and as a result present many opportunities.”

While Bolton says the policy and corporate governance risks of Chinese companies are well known, the manager believes the general strength of company balance sheets is underappreciated.

“Many of the companies I have invested in fall into two broad categories. Firstly companies that I believe have the ability to grow significantly over the next 10 years on fair valuations,” Bolton adds.

“These are at a premium to Western equivalent valuations, but often not a significant premium. Many of these have businesses which are similar to ones that I have observed grow significantly in the West and which have been rewarding for investors.

“Secondly, medium or smaller sized companies with reasonable growth potential where the valuations are very attractive, often with valuations at or below Western equivalents.”