Fidelity China Special Situations (LON:FCSS) has announced its monthly summary for July 2024.
Portfolio Manager Commentary
Continued policy support with signs of more urgency from the government, along with a stabilisation in property prices and activity, would be crucial to see a better economic outlook for China. Such developments should boost consumer confidence, unlocking pent-up consumption potential among Chinese households. Additionally, we need to see corporate earnings coming through and further capital returns to investors. The property market remains a critical area. Despite a slower decline in property prices in June, policymakers have room to provide more support, such as further reducing buying restrictions or mortgage rates. While current policies have not yet gone far enough, at least they show the government is keenly aware of the issues. In markets, China equity valuations remain attractive. There is good upside potential for returns if company forecasted earnings are delivered and still a margin of safety in valuations if they are downgraded.
Financials remain the biggest drag on relative performance, broadly due to the Trust’s underweight position in large cap Chinese banks. Encouragingly, robust security selection across consumer names added value with notable contributors being long-term positions in Hisense Home Appliance, Crystal International and JNBY Design.
Over the 12 months to 31 July 2024, the Trust’s NAV declined by 14.0%, underperforming its reference index, which delivered -12.2% over the same period. The Trust’s share price declined 14.8%.
Fidelity China Special Situations PLC (LON:FCSS), the UK’s largest China Investment Trust, capitalises on Fidelity’s extensive, locally-based analyst team to find attractive opportunities in a market too big to ignore.
