Anthony Bolton, the highly successful U.K. fund manager who came out of retirement this year to take over a new China-focused fund for Fidelity, is particularly keen on smaller Chinese firms.
Bolton recently told Dow Jones Newswires that small- and medium-sized businesses (those with market caps under $5 billion) tend to be under-researched in China. “[Their] balance sheets are much stronger than I expected with many companies having net cash positions,” Bolton adds, saying that such firms often have reasonable growth potential and are cheaper than their Western counterparts.
Bolton likes Chinese consumer stocks, including those in the retail, hotel, mobile phone, and media industries, as well as financials, electrical distributors, gas distributors and investment companies that are selling at significant discounts, Dow Jones reports. He is avoiding commodity and heavy industry stocks. Consumer stocks are attractive in part because China is in a “sweet spot” on the “S-curve” — the stage of economic growth in which population rises steadily but consumption increases rapidly, Dow Jones explains. China’s retail and service sectors are expanding rapidly, with middle-class Chinese spending more on items like branded clothes, food, and cars.
Bolton also discusses China’s future growth prospects, and why he thinks the country is becoming increasingly attractive for investors.