Fidelity feels optimistic about Year of the Dragon

A number of Fidelity fund managers have given their view on the pending year of the Dragon in China.

Anthony Bolton, Portfolio Manager, Fidelity China Special Situations Fund:

“It will become apparent in the next 12 months that the house-of-cards view that many have of China is wrong. We won’t see a hard landing and we won’t see growth disappear and that will lead to a reassessment of international views on China. It’s not going to be something that happens overnight but within 12 months I think the international view will change

“Lower inflation in China creates a positive background for further monetary policy easing. GDP growth will be in the 7-8% range depending on how the international situation develops. Valuations are low and sentiment is still very cautious and my investment approach is to bet against these views. I am positive and bullish.

“My long-term thesis is that the China market will decouple from western markets. As we see a two speed world develop we will see money flowing into places where there can be growth.”

Nick Price, Portfolio Manager, Fidelity Funds Emerging Markets Fund:

“China is a polemic topic for forecasters – some say that the country is heading for a hard landing and others say a soft. Quality economic data is often hard to obtain and the precise evolution of the world’s second largest economy remains difficult to predict. Regardless, China still offers a wealth of opportunities thanks to pockets of activity where businesses will continue to flourish. As stock pickers, we can avoid more economically sensitive areas of the markets such as housing developers, steel producers and industrial goods companies and instead focus on businesses with revenues underpinned by more structural growth drivers.

“Internet penetration is currently a mere 39% of the total population, in stark contrast to the US figure of 78%. China is expected to add an average 61 million users per year, roughly equivalent to the UK population, until 2015. This offers a huge opportunity for internet companies as well as smartphone providers that are increasingly responsible for connecting new users. We currently hold positions in internet search engine Baidu and social media platform Tencent. Both Baidu and Tencent have emerged as leaders in their respective fields and are continuingly reinvesting in their businesses to sustain their advantage.”

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