Fidelity China upbeat on outlook as it outperforms benchmark

Fidelity China Special Situations updated the market on its first half performance on Friday, reporting that its net asset value per share total return was 13.1% in the six months to 30 September.

The FTSE 250 company’s share price total return for the period was 12.2%.

Over a three-year period, the net asset value total return was 95.3%, and the share price return was 91.2%, both significantly outperforming the company’s benchmark index - the MSCI China Index - which had a return of +72.4%.

Portfolio manager Dale Nicholls said he believed there was still good value relative to the long-term growth potential in the Chinese market.

“We are currently in the midst of a clear cyclical upturn in the economy,” he explained.

“Supply-side reform in areas like steel and cement has helped to lift pricing across a range of commodities.”

On the policy front, Nicholls said there was increasing rhetoric focussed on the risks associated with the build-up of credit the company had seen in the economy.

“This focus could become stronger post recent leadership changes - all positive in addressing our major concern for the long-term health of the economy.

“The environment remains positive for ongoing growth in consumption as part of the natural expansion of the middle-class, a key investment theme for the portfolio.

“While market sentiment has clearly turned more positive to the risk-reward balance around the opportunities in the Chinese market, we still find good value relative to the long-term growth potential.”