Veteran UK fund manager Anthony Bolton believes that China’s “momentous” package of economic reforms, revealed last week, will be the catalyst that draws foreign investors back to one of the world’s worst performing equity markets. On Friday, China’s top leaders released a blueprint for change covering various aspects of economic, social, and financial policy. Some economists have described it as the most important political development in China for more than 20 years.
Mr Bolton, a perennial China bull, steps down from running Fidelity’s China Special Situations fund in April next year. He sees these sweeping changes as the key to reversing years of entrenched antipathy towards Chinese equities among global investors. “What I think is really impressive is the extent of what they’re doing, and the amount of reform that they’re doing. . . When you add all this up, I think it is pretty significant,” said Mr Bolton. “There hasn’t been a catalyst, particularly to get foreign interest back in China. I think this could be the catalyst that brings that money back,” he added. “I think this will be the new story.” China’s stock market has been among the world’s worst performers since Mr Bolton set up his fund in April 2010. The H-share index of Chinese companies listed in Hong Kong has fallen 12 per cent, while the FTSE 100 has risen by one-fifth and the S&P 500 is up by about 50 per cent. Much of the negativity has come from fears that bad debts are building up in the banking sector, something that is much less of a concern for Mr Bolton. “I’m much less worried about the financial things that have worried other China bears,” said Mr Bolton. “There are certainly issues out there, but I think China . . . can move money around in the system to alleviate these problems and push them into the future.” Mr Bolton, who made his name as one of the UK’s most successful stock pickers, has overseen a patchy three years in charge of Fidelity’s flagship China fund. Many criticised his early attempts to apply western-style investing logic to China’s complex and opaque market, while the fund’s performance was hit by accounting scandals at some listed Chinese companies including Sino-Forest, which Mr Bolton had invested in. By September 2012, the fund had lost one-third of its value. However, Mr Bolton has enjoyed a recent reversal in fortunes. The fund is up 26 per cent this year, compared with a 2 per cent rise in the MSCI China index against which its performance is measured. After more than two years underwater the fund’s share price is finally back into positive territory. While most analysts agree that China’s reform package will prove positive for the longer term health of the economy, opinion is divided over whether it will be good news for investors. China’s stock market is dominated by large state-owned enterprises, which are expected to suffer during any overhaul of the country’s economic model.