Fidelity China Special Situations PLC

Asia Equities

Rated Fund 2015-19. Taps into rising consumer demand

Fidelity China Special Situations suffered double-digit falls in its share price and net asset value during 2018 but has outperformed over three and five years and since launch in 2010, significantly so over the longer timeframes.

It is one of only a couple of investment trusts that focus purely on China, a market some people argue is too big to ignore. David Liddell, a director of IpsoFacto Investor, an online investment advisory service, says: “For long-term investors who can take some volatility, China – with its ever-expanding middle class –is surely a must for some proportion of an investment portfolio.”

Dale Nicholls has managed the trust since 2014 and presided over a considerable improvement in its performance. This is partly due to an improvement in investor sentiment towards China and partly Nicholls’ focus on ‘new’ China – investing in areas of the market related to China’s modernisation. He likes small and medium-sized companies, where he believes lower levels of research leads to more mis-pricing opportunities.

Since 2016 Nicholls has been able to invest 10% in unlisted companies, up from 5%, amid a trend for Chinese companies to list on a public stock exchange after their development has progressed sufficiently. This exposure, combined with gearing of up to 25%, increases the trust’s risk profile. However, at the end of 2018, it had less than 6% exposure to unlisted companies.

For all these reasons, Morningstar regards the strategy as a “unique way of investing in Chinese stocks” for investors who can tolerate some bumps along the way.

Shares in the trust can typically be bought at a discount to net assets of more than 10%.

Narrative and ratings content all as of January 2019.

See all Money Observer rated funds
Name
Fidelity China Special Situations PLC
Manager
FIL Investment Management (HK) Ltd
Type
Closed Ended Investment Company
ISIN
GB00B62Z3C74
Sector
Country Specialists: Asia Pacific
Launched
19/04/2010
OCF
1.11 %
Risk Rating
5
3 Year Sharpe
0.81
3 Year Alpha
-1.29
Yield
1.5 %
Benchmark
MSCI China GR USD
Fund Size
£ 1.15 billion
NAV
232
Gearing
126
Discount Premium
-10
The investment objective of the Company 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.
Holding %
Alibaba Group Holding Ltd ADR 9.23 %
Fil Usd Loan 3.01% 02/14/2020 8.41 %
Tencent Holdings Ltd 7.48 %
Tencent Holdings LtdCFD 5.12 %
China Pacific Insurance (Group) Co Ltd HCFD 3.70 %
Hang Seng China Enterpise Indx_fut 3.11 %
China Life Insurance Co Ltd H SharesCFD 2.84 %
Hutchison China Meditech Ltd 2.49 %
China MeiDong Auto Holdings Ltd 2.43 %
Noah Holdings Ltd ADR 2.27 %
Region %
Asia - Emerging 86.08 %
Asia - Developed 8.07 %
Sector %
Consumer Cyclical 28.91 %
Technology 22.98 %
Industrials 13.29 %
Financial Services 10.31 %
Consumer Defensive 9.74 %
Healthcare 9.52 %
Name
FIL Investment Management (HK) Ltd
Address
Hong Kong, Hong Kong
UCITS
No
Legal Structure
Closed Ended Investment Company

Managers

Dale Nicholls
Joined 04/01/2014

Dale Nicholls joined Fidelity in 1996 as a Research Associate in our Tokyo office. It was during his tenure as an analyst that Dale first began to take an interest in the dynamics of the Chinese market. He regularly visited Chinese companies to get a clear view of the key supply and demand chains of the industries he covered. In 2003, he was promoted to portfolio manager of the Fidelity Pacific Fund and retains management of that portfolio today. In his current role, Dale spends much of his time travelling within China to meet with the management teams and competitors of companies in which he may, or already does, invest, visiting well over 100 companies a year.

Data provided by Morningstar.

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