Fidelity China Special Situations PLC (LON:FCSS) Portfolio Manager Commentary:
China’s economic recovery started strongly early this year. However, these gains were reversed by a weakness in consumption and in the property sector. We believe that restoration of consumer confidence after three years of severe restrictions needs time. Encouragingly, policymakers are now returning to stimulus measures which should help support the economy. China continues to be favoured for its attractive valuations, especially given the relatively stronger growth outlook and an accommodative central bank vs. global peers. Externally, geopolitical tensions between the US and China continues to dominate headlines.
However, we do not see this derailing the country’s recovery thesis. Both economies remain heavily intertwined, and we continue to monitor how policies have the potential to impact the fundamentals of individual companies and build these risks into our analysis.
Reopening beneficiaries including discretionary spending stocks and insurers posted attractive gains during the review period. Holdings in MINISO, Hisense Home Appliance and China Pacific Insurance advanced. In addition, our underweight exposure to internet names including JD.com and Meituan proved rewarding.
Over the 12 months to 30 June 2023, the Trust’s NAV decreased by 18.4%, outperforming its reference index, which delivered -20.5% over the same period. The Trust’s share price declined 25.2% over the same period.
Fidelity China Special Situations PLC long term pbjective is to achieve long-term capital growth from an actively managed portfolio made up primarily of securities issued by companies listed in China and Chinese companies listed elsewhere. The Company may also invest in listed companies with significant interests in China.
