Fund of the week: Bagging bargains during China’s bull

Now may not seem the best time to invest in China. But a market rout is exactly the time to pick up bargains, says Dale Nicholls, manager of Fidelity China Special Situations (LSE: FCSS). Last month, he said that the recent correction in stocks was “overdone and creating good buying opportunities” in a long-term bull market. “If I’ve got a firm I’m very confident about over the long term and the valuation is at a reasonable level, the earnings should come through and the stock prices should follow,” he tells Leonora Walters at Investors Chronicle.

Nicholls has managed the investment trust created by Anthony Bolton since 2014. It came under fire during Bolton’s stewardship due to poor performance. However, Nicholls has enjoyed a strong first year at the helm – delivering a 32% return over the year to July, and beating the fund’s benchmark. The trust overall has returned 117% over three years and 76% over five. Its goal is to generate capital growth by investing in Chinese-quoted and Hong Kong-listed stocks. It focuses on firms with decent cash generation and strong management.

Nicholls has been picking up large-cap stocks in the Chinese “A” market, such as cookware provider Zhejiang Supor and bus operator Zhengzhou Yutong Bus. He also thinks insurance firm Ping Am will benefit from the middle classes taking out cover. However, he has a short position on the “A” market and favours the less volatile Hong Kong market, focusing on consumer stocks, which he believes have a bright future. The ongoing charge is 1.29%, and the trust currently trades at a substantial discount to net asset value of around 16%.

Contact: 0800-414161.

Fidelity China Special top ten holdings
Name of Holding % of assets
Tencent Holdings 8.40%
Ping An Insurance Co 5.90%
China Pacific Insurance 3.50%
Shanghai International Airport 3.50%
China Lodgings Group 2.74%
Citic Telecom 2.40%
NetEase Plc 2.30%
Hutchison China Meditech 2.20%
Citic Securities 2.10%
Lee Pharmaceuticals 2.00%

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