Fidelity fund manager Anthony Bolton has increased allocations to internet companies as well as gas and alternative energy stocks in preparation for the “new China”
The manager of the £564.3m Fidelity China Special Situations investment trust argues that the Chinese economy looks set for a transition that that will see it driven by consumption.
He says: “The old China saw very high spending on investment and infrastructure. I think you will see less of the in the future, although it will not disappear.
“The future in the new China is about domestic consumption and services. This is the orientation and the driving force for the economy.”
Bolton also adds that against a backdrop of 6 per cent growth overall in China, areas linked to consumption are “still growing by double figures”.
Recent political reforms also play a key role in the new China, argues Bolton, with expectations that reforms for migrant workers could feed into consumption.
He says: “A huge element of urbanisation growth is migrant workers. The government is reforming the Hukou system to give them more rights. That will allow these people to have more money to spend on other things.
“Generally there is quite a strong relationship between urbanisation and consumption. So as urbanisation increases, you would expect consumption to go up.”
One particular area that Bolton looks to tap into consumption is through through internet stocks, and e-commerce in particular. He says: “Internet is the big area in the fund at the moment.
“E-commerce in China as a per cent of all retail sales has actually overtaken America. It is a very vibrant area of the economy.”
The fund has been increasing its exposure to IT by 11.2 per cent over the last 12 months, mainly through the addition of internet companies such as the unlisted business, Alibaba.
Alibaba owns China’s eBay equivalent Tabao which has a 95 per cent market share, as well as “the Amazon of China”, Tmall, with 56 per cent of all ecommerce using its site.
Bolton also notes that private companies such as Alibaba look set to outperform and could prove more profitable in the “new China”. He adds: “In the future you want to be exposed to private companies rather than state owned enterprises.”
Political reforms based around “anti-pollution” have also prompted Bolton’s recent move to add to gas and alternative energy stocks such as China Longyuan Power and New Ocean Energy.
Fidelity China Special Situations’ cumulative performance to 24 July 2013
|Fidelity China Special Situations||2.29%||-2.85%||26.49%||-9.57%|
|AIC Country Specialists: Asia Pacific||-5.35%||-3.32%||23.72%||9.06%|
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Source: FE Analytics