Fidelity’s Raymond Ma has significantly reduced his underweight to the telecoms sector in order to capitalise on price weakness since the start of the year.
The Citywire A-rated has added 6-7% to his $2.01 billion Fidelity Fund – China Consumer fund since the start of the year.
While Ma remains underweight the sector, holding 9.1% compared with a 10.7% index weighting, he said the shift over the past nine months has been significant.
‘Telecoms is an area where I am currently underweight, but something I decided to look at again. We owned some China Mobile, which we bought at $75 in the first quarter, and we added to more considerably when the price fell and it is now climbing higher.’
The state-owned telecoms company, which makes up 4.5% of the fund at present, runs contrary to Ma’s wider emphasis on avoiding stocks and sectors which are subject to Chinese government control.
However, he said this stock, as well as China Unicom and China Telecom, could potentially benefit from increased smartphone usage, as they will serve as data carriers.
Smartphone penetration has reached 50% in China, while the country is now the world’s second largest internet user behind the United States, Ma said.
‘There is a lot of attention on the iPhone supply chain, for example, and a lot of western investors will be aware of Foxconn and other companies involved in making the products but there are other opportunities,’ he said.
‘As we see more and more people accessing the internet through handsets, rather than laptops or desktop computers, we will see a potential boost for some of these “old China” stocks.’
Elsewhere in the fund, Ma has also increased his financials exposure, another sector which is renowned for state-owned enterprises and top-down intervention.
‘We are looking mainly at the insurers and the brokers rather than the banks, where the issue of non-performing loans has not been cleared up. Insurers and brokers are showing good organic growth and I am overweight that sub-sector of the financials market.’
He currently has 30.2% of the fund exposed to financials compared to a 37.2% allocation in the MSCI China index. Ma has increased his position from 25.3% over the past quarter, with his largest position being in insurance company Ping An, which makes up 5.3% of the fund.
The Fidelity Funds – China Consumer returned 36.3% in US dollar terms over the three years to the end of August 2014. This compares with a rise of 30.3% by its Citywire benchmark, the MSCI Golden Dragon TR USD, over the same period.