Posted inChina

Fidelity China trust cuts fees after solid year

Performance was boosted by ‘robust’ stock picking in the consumer space.
Clay statues of Chinese Qin dynasty soldiers

Fidelity China Special Situations trust announced it will cut management fees by five basis points to 0.85% from 1 July.

The cut will apply to the first £1.5bn ($1.88bn) of net assets, whereafter the current fee of 0.7% will remain.

The trust outlined the changes in its full-year results to 31 March 2023. During the period net asset value (NAV) grew by 2.6%, bettering the 1.4% returned by its benchmark, the MSCI China index.  

The report highlighted “robust stock picking” in both the Chinese consumption space, and in materials, as a positive contributor to performance. It also attributed some success to the overweight allocation to industrials.

Portfolio manager Dale Nicholls said he had focused on the rise of the Chinese consumer throughout his time managing the trust, and around 43% of the portfolio was invested in consumer stocks at year end.

Nicholls said: “The biggest change post-Covid is the outlook for the consumer. While the recovery is bumpy and varies somewhat by sector, the path to recovery is clearly there. Having said this, the obvious beneficiaries of reopening – particularly travel and certain consumer stocks – saw a significant upswing as the zero-Covid policy was lifted.

“However, this has made the investment case less compelling for some companies and overall I have reduced exposure to such names.”

The trust’s share price crept up only 0.3% during the period, and some of the financial, technology, and communication companies in its portfolio proved to be a drag on returns.

Chair Mike Balfour pointed out that China’s economic growth rate was at its lowest in decades during 2022, at just 3%, but he said the economy and stock market were recovering following the removal of the zero-Covid policy.

He added: “While growth rates on the whole have clearly tempered in the second quarter, the government’s GDP target of 5% for the year looks achievable. This will make China one of the few large economies that will see accelerating economic growth in 2023.”

The trust’s dividend, which has grown every year since inception, grew by 13.6% to 6.25p.

This story first appeared on our sister publication, Portfolio Adviser.

Part of the Mark Allen Group.