Bolton on Why China Lured Him Back

Top U.K. manager Anthony Bolton of Fidelity is managing a new China-focused fund, and he recently told London’s Telegraph why the opportunity lured him out of retirement.

“This may be the biggest economic and investment story of our generation,” Bolton says. “I believe that China’s economy could expand at nearly 8% a year between 2011 and 2020, and by more than 5% a year over the subsequent 10 years. The sheer scale of China, with its population of more than 1.3 billion, means the world may never have seen anything like the economic transformation of China that lies ahead.”

While China and Chinese stocks have gained a lot of attention in recent years, Bolton says global stock markets still don’t reflect China’s economic presence. “At the end of 2009, China represented only about 2% of the total capitalisation of global equity markets,” he said, even though it is one of the three largest economies in the world. “A combination of new issues and market growth will, I believe, lead to China’s stock market becoming the world’s second largest within the next 20 years.”

The next few years provide the most interesting investment opportunity in China, Bolton adds. To date, he says, China’s economic success has largely been a result of its workforce and exports. “But,” he says, “China will develop from being the workshop of the world to one of its leading consumers” in the coming years. Demand for consumer goods could explode, and major infrastructure development should be needed as more Chinese move to urban areas, he says.

Bolton also says he doesn’t see a bubble in China. “On my assessment of current valuations, I don’t believe so,” he says. “Also, I think the clock started ticking again in November 2008 when the market recovery began and in my experience bubbles take several years to develop, not a little over one. I am confident that for investors with a long-term view there will be very many stock-picking opportunities in China in years to come.”

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