Confucius says stock market
By Jeff Prestridge for The Mail on Sunday. Investing in emerging markets is not for the faint- hearted.
They either boom or go into freefall — there is no halfway house — and only patient, long-term investors ever get rewarded. No emerging markets fund has illustrated this rollercoaster journey more spectacularly in the past three years than FTSE listed Fidelity China Special Situations investment trust. Hong Kong, home to Fidelity's China Special Situations Investment Trust, has proven difficult to conquer. Financial advisers, paid commission by Fidelity for recommending it to clients, backed the trust in droves.
Yet not even the great Bolton, who built his reputation running the Fidelity Special Situations fund with much aplomb for more than a quarter of a century, has been able to master the ups and downs of emerging markets. Since decamping to Hong Kong to run the trust, he has spent much of his time fire-fighting as markets have turned against him and some of his investments have turned horribly sour the fund has even been a victim of corporate fraud along the way.
These include an economy overly dependent on investment in infrastructure; consumers that do not consume enough; local governments deep in debt; a massive pollution problem, especially in the north; and a booming housing market that most commentators believe is unsustainable. Over the same period, the FTSE All-Share index has risen nigh on 40 per cent.
The fund has disappointed and not even a cut in the fixed annual management charge has assuaged investors, with the shares trading at a discount to their underlying value. Anthony Bolton is confident investors can still make money from investing in private companies operating out of China. Bolton, not surprisingly, has decided to retire, leaving Nicholls, an Asia specialist, to run the trust from next April.
Confucius Says
Indeed, he believes the reforms, covering everything from an end to the one child per family policy through to greater pension rights for migrant workers, are the most significant since Deng Xiaoping starting pushing China towards a market economy road years ago. At last with the publication of the reform programme, we could have a catalyst with the potential to reverse this underperformance.
Not everyone is as positive. More supportive is Tom Becket, chief investment officer at investment house Psigma.
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Bolton may be right and Chinese stocks could go from strength to strength on the back of a modernising, reforming economy. Equally, he could be wrong. Well done to the Financial Conduct Authority for putting lenders on red alert that it is set to crack down on those that use small print to hike up mortgage tracking rates for borrowers.
It is obvious that a lender that sells a mortgage on the back of a predetermined tracking rate, typically linked to the base rate, is being unfair if it then increases it. The regulator requires financial firms to treat customers fairly and such hikes are nothing but unfair.
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