Fidelity China Buys Back Shares for First Time

Fidelity China, the investment vehicle managed by Anthony Bolton, yesterday bought back stock for the first time after shareholders dumped their holdings following its poor performance.

A local investor watches the share-prices index display at a stock brokerage in Shanghai.
Liu Jin | AFP | Getty Images
A local investor watches the share-prices index display at a stock brokerage in Shanghai.

The investment trust spent more than £380,000 ($608,000) mopping up its shares in two separate buy-backs during the day, at about a 5 per cent discount to the underlying value of the company.

The move by the board was in stark contrast to Fidelity China’s decision to launch a C share earlier this year in a bid to meet demand for shares which briefly shot to a 13 percent premium last November.

Analysts said that the buy-back, while relatively small compared with the trust’s market capitalization of £573 million, sent a signal that the board was prepared to act to prevent the discount widening further.

Mr Bolton has suffered a number of setbacks since returning to fund management with much fanfare in April 2010 to run Fidelity China. Retail investors initially piled into the new fund due to Mr Bolton’s reputation as the manager with the Midas touch, following his excellent long-term record running the UK Fidelity Special Situations fund.

But the Fidelity China fund revealed disappointing first-year results in June, while Mr Bolton admitted getting his fingers burnt in two US-listed Chinese stocks as part of the reverse merger scandal earlier this year.

Since launching in April last year, the share price has slumped 15.1 percent, versus an 8.9 percent fall of the MSCI China index.

“There has been some noise over whether Bolton is up to the job,” said Simon Elliott, investment trust analyst at Winterflood Securities. “Given the retail shareholder base, you can imagine people losing a bit of faith and looking to exit their positions.”

Mark Dampier, head of research at Hargreaves Lansdown, one of the largest shareholders in Fidelity China, said that he was not advising investors to sell.