Fidelity China Special Situations (LON:FCSS) has announced its monthly summary for December 2023.
Portfolio Manager Commentary
Chinese equities started 2023 on a strong note amid hopes of a market revival following its sudden reopening in December 2022. However, the rally fizzled out as concerns over a fragile economic recovery, prolonged housing slump, weak consumption demand and underwhelming stimulus measures led to a heavy selloff. Nevertheless, policy direction towards regulatory loosening is clear. Job and wage cuts in 2023 have clearly hurt consumer confidence. However, from our discussions with companies, we have the sense that the worst is behind us. Over the longer term, improving corporate earnings could be a key driver for an improvement in investor confidence. Meanwhile, valuations in the Chinese equity market remain compelling, both in historical terms and compared with some other major markets. Clearly, a lot of pessimism over the economy appears to be priced in.
Security selection within the consumer discretionary sector enhanced gains and holdings in MINISO and Hisense Home Appliance advanced. Shares in BC Technology rose amid the overall strength of cryptocurrency prices. Our underweight exposure to internet names including JD.com and Meituan proved rewarding. Their shares remain pressured amid concerns over a lacklustre consumer spending recovery and intensifying competition.
Over the 12 months to 31 December 2023, the Trust’s NAV decreased by 9.5%, outperforming its reference index, which delivered -16.2% over the same period. The Trust’s share price declined 9.3% over the same period.
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.
