UPDATE 2-Fidelity to reopen two big funds to new investors

* Contrafund outperforming S&P index this year

* Bear market may hinder inflows, says analyst

* Contrafund manager sees opportunities in current market (Recasts, adds fund returns data, analyst comment, byline)

By Muralikumar Anantharaman

BOSTON, Dec 2 (Reuters) - Fidelity Investments is reopening two big stock funds to new investors as the tumble in stock markets to five-year lows and a rise in investor withdrawals has eroded assets under management.

Fidelity, the world's biggest mutual fund company, said it will reopen the Contrafund, its biggest stock fund, and the Low-Priced Stock Fund, from Dec. 16. Contrafund has been closed to new investors since April 2006, and Low-Priced since December 2003.

Fidelity said 88 percent of Contrafund's assets and 85 percent of Low-Priced Stock Fund's assets are focused on retirement, and shareholders were redeeming them after meeting their financial goals.

"Since the funds have been closed, they have not been able to generate sufficient levels of new sales to offset current and future redemptions," Fidelity said in a statement.

It hoped reopening the funds will steady cash flows to help managers fund investments.

Some analysts doubted the move would lead to a swift influx of money into the funds.

"That won't come to bear until investors' aversion to stocks changes," said John Bonnanzio, editor of independent newsletter Fidelity Insight. "They've got a far greater issue with the bear market going on," he added.

Research firm Morningstar cited Contrafund manager Will Danoff as its top U.S. stock fund manager for 2007. The fund's assets have tumbled 44 percent this year to $45 billion as of Nov. 30 from $81 billion at the end of 2007.

"The recent market volatility has created investment opportunities with stock prices down so significantly from their highs," Danoff said in a statement.

Contrafund has outperformed the Standard & Poor's 500 index .SPX this year, losing 43 percent through Monday's close, compared with the benchmark's negative returns of 43.2 percent.

Low-Priced Stock Fund is run by Joel Tillinghast and had $17.3 billion in assets as of Nov. 30. The fund has underperformed the S&P index, losing 45.6 percent.

Both funds' performances are far better than those of Magellan, Fidelity's most famous stock fund, which was reopened to new investors in January after being closed for a decade.

Magellan, which once ranked as America's largest stock fund with more than $100 billion in assets, is down 56.4 percent and is the third-worst performing fund in the large-cap growth category, according to Lipper Inc.

The fund's assets have fallen 58 percent this year to $18.6 billion as of Nov. 30.

Fidelity managed more than $1.2 trillion in assets as of Oct. 31. That is down from about $1.6 trillion at the start of 2008. (Editing by Jason Szep and Jeffrey Benkoe)