Anthony Bolton blames exposure to volatile medium and smaller-cap Chinese stocks for the Fidelity China special situations invest-ment trust’s 28.9 per cent fall in net asset value in the first half of the year.
The trust underperformed its MSCI China index benchmark, which was down by 24.5 per cent.
Bolton blames the trust’s exposure to more volatile medium and smaller-cap Chinese stocks and gearing levels. He says he was wrong to expect Chinese stocks to decouple from the West.
Bolton says September was “a brutal period” for Asian markets. He says: “My optimism on markets generally and China specifically has been tested. 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.”
Bolton says inflation is starting to improve, with Chinese growth expected to reach 8 per cent but any deterioration in the global economy could see this shrink to 5-6 per cent.
He says: “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.”
Hargreaves Lansdown head of research Mark Dampier says: “Everyone investing in China has had a difficult time, he is only 4 per cent off the benchmark. No one suggested selling out of the fund when he was doing well.”