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Bolton’s China trust reports "disappointing" results

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The half year results for Anthony Bolton’s Fidelity China Special Situations investment trust make for “disappointing reading”, according to John Owen, chairman at Fidelity.

The investment trust has underperformed its MSCI China index benchmark, as net asset value dropped 28.9 per cent.

Owen says: “The board acknowledges that the results for the six month period to September 30 2011 are unsatisfactory, but it remains confident that the portfolio’s continuing focus on domestic consumption remains the best strategy for providing long-term capital growth to shareholders.”

Bolton says the few weeks to the end of September had been a “brutal period” for Asian markets, “as difficult a time to be running money as I can remember”.

He says: “My optimism on markets generally and China specifically has been severely tested.”

Bolton adds: “Over and over again I have asked myself whether I should revise my view in light of the deteriorating position in Europe and potentially also in the US, but I have concluded that the world is not in such a bad position as many think.”

“It may still end up there at some stage over the next year or so but I believe the balance of probabilities is against such an outcome.”

However, Bolton remains optimistic overall, despite recent market challenges.

Bolton blamed the trust’s exposure to more volatile medium and smaller cap Chinese stocks and gearing levels.

The fund manager says he had been wrong in expecting Chinese stocks to decouple from the West.

He says inflation is starting to improve, with Chinese growth expected to reach the 8% level. However, any further deterioration in the global economy could see this shrink to around the 5-6 per cent level.

Bolton adds: “The next 12 months should be a defining moment for Chinese investment when investors realise the economy is not about to collapse and the tightening period is over.

“In the meantime I can only assure shareholders that I will make the upmost effort to reverse the recent underperformance of the company’s assets and in turn of the share price.”

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