Despite the global tensions between China and the US, numerous investors are just looking for an opportunity to invest in the second largest economy in the world.
Speaking at a media event yesterday (23 April), Fidelity China Special Situations portfolio manager Dale Nicholls explained that, in spite of these tensions, certain Chinese firms have a stronger resilience and are not as impacted by them.
One good example of this, he said was Tsingtao Brewery, which is a holding within the Fidelity China Special Situations.
Tsingtao Brewery is the second largest brewery in the country and accounts for half of China’s national beer exports.
However, from a macro perspective, he said: “I think China would be happy to have better relationships with the US, but from a market perspective, people are used to this.
“We have been dealing with tariffs for years now.”
The Fidelity China Special Situations is an investment trust, and Nicholls added: “There is always a healthy appetite for investment trusts from IFAs, as it is a pretty resilient investment vehicle.”
He also said the Fidelity China Special Situations has received a lot of attention from its merger with Abrdn China Investment Company, which “solidifies” its position as the largest UK investment trust in the sector. This merger was announced on 13 March 2024.
Nicholls has now been manager of the Fidelity China Special Situations for 10 years.
“Since its launch in 2010, the trust has offered direct exposure to China’s growth story. As portfolio manager, it is my job to try to identify and invest in companies that are best placed to capitalise on China’s transformation.”
The Fidelity China Special Situations has showcased a +125.7% return to shareholders, outperforming its benchmark index, the MSCI China, which returned +49.3%.
China has been experiencing an economic slowdown, with the International Monetary Fund predicting its economic decline will likely continue over the next four years.
Nicholls remains bullish and said: “While the road will likely remain bumpy, I remain very confident in the risk-reward set-up for my key holdings in the trust. I remain very happy with my personal holding in the company, which has grown in the past couple of years.”
However, he did caution that the property market in China has created a “big drag” with very low sales.
He also revealed that a big part of his client base is UK independent financial advisers.
Should it invade Taiwan, will western investors withdraw from China and cease trade with it? Probably not, unfortunately.