# China equity valuations potential upside on forecasted company earnings says Fidelity

- Link: https://www.directorstalkinterviews.com/china-equity-valuations-potential-upside-on-forecasted-company-earnings-says-fidelity/4121169498
- Published: 2024-08-27T08:10:03+01:00
- Author: Amilia Stone

**[Fidelity China Special Situations](https://www.directorstalkinterviews.com/company/fidelity-china-special-situations/fcss.l)**(
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%. 

[FCSS-31-July-2024](https://www.directorstalkinterviews.com/wp-content/uploads/2024/08/FCSS-31-July-2024.pdf)
[Download](https://www.directorstalkinterviews.com/wp-content/uploads/2024/08/FCSS-31-July-2024.pdf)

**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.

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