Fidelity China SS - Share Offering

Newbie2saving

Hi all,

I already hold this investment trust as part of my portfolio and further shares are being offered to existing customers in the first instance and then to new if the full allocation isn't taken. I know this is a risky fund to hold, but I was just interested in knowing what existing investors (and those other wise investors out there) thought of this 'opportunity'...?

http://www.thisismoney.co.uk/investing/article.html?in_article_id=520937&in_page_id=166

TIA.

purch

If you want to invest more into this IT then this would be a better way of doing so, rather than buying more in the market.

The offering doesn't appear to dilute the value of existing shares, and will give you shares in the IT at a discount to the currently inflated price compared to NAV.

If you don't want to invest more into the IT, then doing nothing should not have any detrimental effect on your current holding.

Newbie2saving

Thanks for the speedy response Purch. I don't really want to add more into this IT at the moment, but was wondering how this new release would impact on my current holding.

Also haven't seen what the new min investment is, does anyone know?

I'm also interested to hear what other's are doing out of curiosity!

Jake'sGran

No, I don't know what the min is and like you already have this IT. I'll wait until the paperwork arrives but as Anthony Bolton is the manager I will be tempted.

Newbie2saving

Jake'sGran wrote: »

No, I don't know what the min is and like you already have this IT. I'll wait until the paperwork arrives but as Anthony Bolton is the manager I will be tempted.

I know what you mean re Anthony Bolton, but the more and more I read about China and it's currency I think what little money I have in may be the maximum I invest in this fund! However, once the literature arrives I may be tempted...

Newbie2saving

Just read the prospectus and the min additional investment is £1,000.

https://www.fidelity.co.uk/static/pdf/common/statutory-documents/css2-prospectus.pdf

mutley74

i already have an existing holding in this fund and will be looking to increase this by at least another £1000.

Newbie2saving

This is an interesting article and mentions that the shares may well fall once Anthony Bolton leaves the fund in 2013 (which I was aware of this risk with Bolton's great record). Also the concerns re the license and the amount it permits them to invest in China’s domestic A share market.

http://www.ft.com/cms/s/0/6cfae00e-1a9e-11e0-b100-00144feab49a.html#axzz1AvSiy6E1

pinkteapot

I think this is an important point - "Institutions, however, were more lukewarm about the prospect of a UK fund manager venturing into the Chinese market."

Investing in China is completely different to the UK. The sectors that rocket up in China are those which the government supports. The fund managers who do best are those who have high level government contacts and know what government policy is going to be ahead of the rest. I'm skeptical about the hype around Anthony Bolton managing this Fund. His UK track record was absolutely superb, no question about it. But you wouldn't assume Tiger Woods was a great footballer. That's probably overly harsh as Fidelity no doubt has a good and experienced China equities team out in HK that Anthony Bolton works with. The Fund has been a wonder of marketing.

Re the A-share issue. Chinese companies which have A-shares are dual-listed (the vast majority of the time), with both A-shares and H-shares available. A-shares are available only to domestic Chinese investors or QFII (qualified foreign investors) with a license. So Mr. Bolton can buy virtually all the companies available anyway, buying H-shares which are listed in Hong Kong. There is often a valuation gap between A-shares and H-shares so he's missing out on some arbitrage opportunities.

FYI, rough guide to Chinese share types:

H-shares: companies domiciled in mainland China with shares listed in Hong Kong. The state is the majority owner of the company.

Red-chip: companies both domiciled and listed overseas, usually in Hong Kong. Also state-owned.

P-chip: mainland companies with a listing overseas, usually HK but may be US, Singapore, etc. The defining feature is that the company is not state-owned. I.e. they are private enterprises that have listed.

A-shares: same as H-shares but listed in China and available to domestic investors/QFII foreigners.

Newbie2saving

That is really interesting pinkteapot, thanks for the input. I didn't know all the details of the way stocks differed in China, as I have this fund I should have known I suppose!

There has been a lot of hype around this fund and I was surprised they didn't reach their original target of investment. I was concerned about the dilution effect of the new share offer, also the c shares offer a good deal IF an original investor wanted to invest more.

Thanks again!

jimjames

I've done a bit of checking, doesn't look such a great deal - at least not to buy them but ok if you are already a shareholder.

http://www.investorschronicle.co.uk/Companies/ByEvent/NewIssues/Analysis/article/20110112/1a9b0d72-1da3-11e0-a809-00144f2af8e8/Fidelity-China-feeds-emerging-demand.jsp

Coupled with the fees, this unfavourable conversion ratio effectively means the new shares are being offered at a steep 5.2 per cent premium.
Meanwhile, the ordinary shares have fallen since November and now trade on a premium of just 2.6 per cent. Either way, investors are better off buying shares on the open market than subscribing to the expensive C-share offer.