Fidelity China Special Situations (LON:FCSS) has announced its monthly summary for August 2024.
Portfolio Manager Commentary
Continued policy support with signs of 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. While the current policies show the government is keenly aware of the issues, policymakers have room to provide more support. 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 dragged relative performance, broadly due to the Trust’s underweight position in large cap Chinese banks. The communication services sector was mainly weighed by the long-standing underweight position in Tencent. Shares in Hesai were weakened by geopolitics, but its recent reported removal from the US sanction list has brought some relief. Meanwhile, security selection across consumer and industrials names added value with Crystal International and Shanghai Kelai Mechatronics being notable contributors.
Over the 12 months to 31 August 2024, the Trust’s NAV declined by 11.9%, underperforming its reference index, which delivered -6.3% over the same period. The Trust’s share price declined 11.4%.
