China investment opportunities: FCSS well placed for upside from China rerating

Fidelity China Special Situations (LON:FCSS) published its monthly factsheet for the period ended 30th April 2023.

Portfolio Manager Commentary
China continues to be favoured for its attractive valuations and upbeat outlook for a consumption-led recovery. The overall pro-growth environment in China will support its post reopening recovery. Following policymakers’ accommodative policy shifts, the property sector and service activities stabilised and improved, which was well received by investors. Meanwhile, China’s market valuation remains at historical lows despite the recent rally, suggesting more upside from re-rating. Geopolitical tensions between the US and China continues to dominate headlines and batter market performance. However, we do not see this derailing China’s re-opening recovery thesis. Both economies remain heavily intertwined, and the key thing to evaluate is how policies have the potential to impact the fundamentals of individual companies and building these risks into our analysis.

Preferred consumer discretionary holdings added notable value. Consumer names advanced amid hopes of consumption recovery and holdings in MINISO, Hisense Home Appliance and Luk Fook advanced. The underweight exposure to JD.com and Meituan proved rewarding as intensifying competition and potential margin pressures in the e-commerce industry led to a sector wide sell-off.

Over the 12 months to 30 April 2023, the Trust’s NAV decreased by 0.3%, outperforming its reference index, which delivered -5.9% over the same period. The Trust’s share price declined 4.6% 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.

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