Fidelity's Bolton eyes UK bear market
Thu Sep 27, 2007 7:05pm BST By Laurence Fletcher
LONDON (Reuters) - The UK stock market may be in the first stages of a bear market lasting six to nine months, Fidelity International star fund manager Anthony Bolton said on Thursday.
"It's been my central case that after a four-year bull market we are more likely to have a bear market than a correction and then the bull market continues," Bolton told Reuters.
"It may be that we are in the first stages of that (a bear market). A typical bear market lasts six to nine months."
Bolton, who runs the 3.1 billion-pound Fidelity UK Special Situations Fund and the 410 million-pound Fidelity Special Values investment trust, in 2003 correctly called the start of a bull market in UK stocks that has lasted over four years.
His comments on Thursday come after a turbulent summer for equity and credit markets, prompted by concerns that a surge in defaults in the U.S. subprime sector -- which lends to risky borrowers -- could lead to a wider financial crisis.
The FTSE 100 (.FTSE: Quote, Profile, Research) blue-chip index, which in July traded above 6,700, fell below 5,900 in August although it has since recovered strongly and on Thursday closed at 6,486.4.
"I think we are going to be in a more difficult environment for a while. Investment markets have rallied strongly and in the short term that can go on. But when the evidence of the effects come into the real world (it will be difficult).
"The U.S. mortgage crisis is not one that will be solved overnight ... When people buy a lot of assets they thought were riskless and then lose a bundle, it's a behaviour-changing event that doesn't disappear really quickly."
"MORE GROWTHY"
Bolton, who has built up exposure to sectors such as media and technology in recent years, said he has also increased his weighting in banks, an area where he said his exposure had previously been "extremely low".
While he usually takes a value approach to investing, he said he is currently taking more of a growth approach than normal.
"Value has done very well and my slight concern is that sectors such as tobacco won't be as defensive as they have been in the past," he said.
"At the margin I'm a bit more growthy than normal."
He also said emerging markets, many of which have ridden out recent stock- and bond-market turmoil better than some developed markets, may not be the safe haven that some fund managers have suggested, and said he has reduced exposure to Chinese stocks.
"When we've hit more difficult conditions, historically emerging markets have been affected more than developed markets.
"So far (during this summer's turbulence) that hasn't been the case. People have said they've come of age. I'm not so sure ... I think emerging markets are still higher risk."