Lai See

Bolton finds special situations hard in Hong Kong

PUBLISHED : Wednesday, 19 June, 2013, 12:00am
UPDATED : Wednesday, 19 June, 2013, 4:40am

Star fund manager and erstwhile China bull Anthony Bolton is leaving Hong Kong after a less than stellar performance by his Fidelity China Special Situations fund.

Bolton's fund was set up in 2010 with no little fanfare. His website invited investors to "experience the changing balance of the world economic powers". However, the fund's performance has not matched the initial high hopes, and shares in the fund are currently below their launch price.

Bolton admits he has found it harder than he anticipated and has been unable to match the stellar success he enjoyed during the 28 years running Fidelity UK Special Situations when he produced annualised returns of 20 per cent - an outstanding track record.

However it may be, Bolton's brief visit to Hong Kong has not been entirely in vain. He splashed out on a spanking property on his arrival to demonstrate his commitment, which may well have done rather better than his fund.


Dull prospects

The outlook for Russian aluminium company Rusal looks pretty forlorn. The company's share price is limping along at HK$3.39, almost 70 per cent below its listing price in January 2010.

Citi has a target of HK$1.80 on the stock, while Otkritie Securities is forecasting HK$2.22.

With a market capitalisation of HK$51.5 billion, or US$6.6 billion, this means Rusal's operations are valued at practically zero. Rusal holds a 27.8 per cent stake in Russian nickel giant Norilsk Nickel, which has a market capitalisation of US$6.92 billion. But as the website Dancing With Bears points out, part of the Norilsk stake serves as collateral for Rusal's US$11 billion net debt.

Even with possibly the lowest cash costs of production in the industry, depressed aluminium prices mean that Rusal's aluminium operations do not generate enough cash to reduce its massive debt level. Any impact on the debt is dependent on increased dividends from Norilsk. This is by no means certain.

Meanwhile, Rusal's powerful shareholders are getting restive. According to some commentators, Rusal will have to go through another restructuring. Given the doubts that loomed over the firm at the time of its initial public offering, there will be those that say it should never have been allowed to list. There are others who say that so long as the risks were declared in the prospectus, then it was up to investors to make up their minds. However, unravelling the risks inherent in Rusal is a highly complex operation.


Book them, tow them

Although RTHK's Police Report recently devoted two episodes to illegal parking and the inconvenience it causes the public, it would appear this message has yet to pierce the consciousness of the seven-seater set. As the picture demonstrates, these vehicles double-parked on Jaffe Road in Wan Chai at lunch time, almost blocking the street.

The first Police Report episode on illegal parking showed a police officer booking a driver who refused to leave after being caught parking illegally. Having been booked, she decided that she might as well go shopping. Her vehicle was towed away. Unfortunately, this has not deterred illegal parking at Jaffe Road.

We would recommend the police demonstrate their towing capacity with a brief but intense campaign - something to cause a little excitement and to attract attention to get the message across.


Wyong Forbidden City

Fantastic though it may seem, the plan to build a A$500 million (HK$3.66 billion) replica of Beijing's Forbidden City in a small Australian coastal town is going ahead. The plan was announced late last year, and is still on track.

Wyong is an attractive stretch of beaches, wetlands and wildlife about 90 kilometres from Sydney. The group of Australian Chinese businessmen behind the project, headed by Bruce Zhong, aim to provide an attraction for the thousands of mainland Chinese tourists that now visit Australia.

Why Chinese tourists would want to fly to Australia to see this is anybody's guess. But then again, there was a plan to build a replica Great Wall of China in the hills around Hollywood. Fortunately, it was never built.