Bolton, who is due to hand over running of the trust to Dale Nicholls in April of next year, has steered the trust to a 36.8% rise in net asset value over the past 12 months against a benchmark return of 12.4% (MSCI China).
Over the past six months, this outperformance has accelerated, with the net asset value rising 10.9% against a fall in the index of 1.9%. The trust has been buoyed in particular by the good performance of Chinese internet companies and US-listed Chinese companies. The trust’s small and mid cap bias also proved positive.
Bolton is continuing to position the trust towards domestic consumption and the services sectors with its three biggest exposures to IT, consumer discretionary and healthcare stocks.
He believes that the bearishness towards the Chinese stock market has not shifted. He adds: "Valuations have risen a little above their ten-year lows but they are still well below their long-term average. Although sentiment has recovered somewhat, investors, particularly on the mainland, remain cautious. Internationally, emerging markets and China in particular remain out of favour."
Bolton says he is still finding attractive investment opportunities in Chinese shares and worries over a Western style credit crisis have been overplayed: "The likelihood that the economy will collapse in a Western style banking crisis any time soon, something that several international commentators predict, is extremely remote in my view. The country does have challenges but I would characterise the outlook, influenced as it is by the interplay of a wide range of factors, as more grey than outright black or white."
He believes that while growth is likely to moderate, the current level of growth could continue well into next year.
Investment trust analysts’ Numis, said in a note: "The fund has been trading on a discount since early 2013, currently 8.8%, and there has been some selling pressure since the announcement of Anthony Bolton’s retirement. However, it is positive that the Board has been active in buyback back shares to support the discount, 47m shares have been repurchased, representing 7.4% of share capital.
"We were impressed by Dale Nicholls at a recent meeting and believe that there is a role for a dedicated China fund. However, we believe that there may be further shareholder selling unless the improved performance is sustained."