Bolton: Why I am still a bull on global equity markets

Fidelity's Anthony Bolton has said he remains a world equity market bull despite a global situation that resembles "a big game of poker".

Speaking at Investment Week's Senate Autumn conference, Bolton said too cautious an outlook was currently priced in to shares, especially as valuations before the summer sell-off had been more reasonable than previous economic cycles.

"I am still a bull of world equity markets. I think in this business you have got to look at what is discounted in valuations, not at the outlook," Bolton said.

"A very cautious view is discounted in valuations at the moment. But I do not think we ever got into [the phase of] overvaluation in the bull cycle."

The manager of the Fidelity China Special Situations fund nonetheless remains a believer in a two-speed world, a view he said was now less controversial than it had been 18 months ago.

Quoting former General Electric chief Jack Welch, Bolton said "The world situation today is like a big game of poker, but China has the best hand of cards.

"I think everyone now realises there will be below trend growth in the US and Europe for the next few years. The relative growth in emerging markets is going to look particularly attractive in that environment", he said.

Bolton is forecasting Chinese GDP growth of 8% for 2012, a figure in part based on his view another global recession will not materialise, and he sees the Chinese government's battle with inflation easing off by the end of the year.

"I think the government is going to end the tightening process by the end of this year and that is going to be quite positive for markets", he said.

He said the trend of urbanisation was powerful enough to overcome the possibility of the Chinese workforce dwindling, and the rise of the middle class in China was a theme "all growth investors should have exposure to".

Bolton added he was "as optimistic on China as I have ever been" and suggested structurally higher inflation of around 6% is something China "can live with", even if it means revising the country's official 4% target upwards.

The manager said a slowdown in consumption growth will materialise to varying degrees in parts of the country, but said the region will remain attractive relative to other markets.

See next Monday's issue of Investment Week for more from Anthony Bolton