Fidelity China Special Situations (LON:FCSS) has announced its monthly summary for December 2024.
Portfolio Manager Commentary
Recent government stimulus measures in China show a strong commitment to tackling economic issues and boosting domestic demand. While consumer confidence remains low, discussions with several companies suggest that the worst of job cuts, especially in technology, may be behind us. Elevated household savings indicate potential buying power that could support recovery. The aim is for supportive policies to drive a turnaround in economic fundamentals, leading to broader earnings growth and improved market sentiment. Equity market valuations remain attractive compared to historical averages and global markets. Geopolitical concerns, particularly US tariffs on Chinese goods, persist, but both investors and companies are aware of these risks, and we continue to monitor what is priced in.
Not holding Xiaomi limited gains, as investors remain optimistic about its position as a premium consumer electronics and electric vehicle player. Zhaoke Ophthalmology decreased due to uncertainty related to its drug launches. In financials, underweighting SOE banks hurt performance, while consumer finance added value. In the consumer sector, underweighting Meituan weighed on performance, whereas long-term holdings in consumer durables and apparels, such as Hisense and Crystal International, advanced.
Over the 12 months to 31 December 2024, the Trust’s NAV increased by 12.3%, underperforming its reference index, which delivered 21.6% over the same period. The Trust’s share price increased 8.6%.
China’s government has announced plans to channel hundreds of billions of yuan annually into shares from state-owned insurers by investing at least 100 billion yuan in stocks, with the aim of stabilising the stock market and promoting a positive trend in support for capital markets. The measures will be implemented over two years, starting in the first half of this year, and include encouraging big state insurers to invest 30% of new annual premiums in A-shares and increasing mutual fund holdings by at least 10% annually. This plan is seen as a crucial step to boost investor confidence and stabilize the market, which has been weighed down by a long-running property crisis and deflationary pressure.
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. It invests in the public equity markets of China.
