Fidelity Investments is planning to launch a mutual fund focused on companies that will benefit from strong Chinese consumer growth, and famed portfolio manager Anthony Bolton is returning to the company after two years in retirement to run it.
As manager of the Fidelity International Special Situations Fund for 28 years, from 1979 through 2007, Bolton delivered an annualized average return of 19.5%, compared with its benchmark index’s 13.5% return.
Bolton notes that Chinese incomes are rising at an incredible rate and that the point of inflection will be when per-capita gross domestic product hits the $4,000 to $5,000 mark, which the International Monetary Fund forecasts will happen in 2011.
“As average incomes pass this key threshold, you get a big growth in the group that can afford to make the purchases of cars, apartments, etc., and that is where China is today,” Bolton said. Coupled with a strong banking system that can afford to make consumer loans, the Chinese economy is on its way to significant growth, Bolton said.
“China is the opportunity of a generation, and I’ll only be able to play a bit of a part of that because I’m not going to do it forever,” Bolton said. “I said I’d do it for at least the next two years. The center of gravity is shifting to this part of the world, and I want to play a part in it while I can.”
Although the Chinese economy has been criticized since it is still state-run and often shuts out private enterprise, Bolton sees this as a plus, since projects can be expedited and are not bogged down in politics, as they are in democracies. Bolton also expects the government will eventually permit its yuan to become stronger, which will guarantee investors currency gains on top of the stock gains he predicts.
“I believe in my lifetime, China will become the second-largest stock market in the world,” Bolton added.