Fidelity China Special Situations plc (LON) presents a compelling investment opportunity, providing direct exposure to China’s dynamic growth narrative across a diversified spectrum. Under the stewardship of Manager Dale Nicholls, the trust gravitates towards small- and mid-cap enterprises, perceived as optimal vehicles for harnessing the burgeoning affluence of the Chinese consumer base and, in turn, delivering superior returns. Augmenting its potential for upside, the trust strategically employs structural gearing.
A distinguishing feature of FCSS lies in its ability to invest in private enterprises, currently constituting a substantial portion of its portfolio, thereby fostering divergence from conventional benchmarks and widening the scope for growth prospects.
Despite its principal focus on capital appreciation, FCSS has consistently augmented investor returns through dividend distributions, with a track record of successive annual increases. The most recent dividend payout boasts a historic yield of 3%, underscoring the trust’s commitment to delivering value to shareholders. Recognizing this commitment, Kepler accorded FCSS its coveted Income & Growth rating for 2024.
Over the long term, Dale Nicholls has steered FCSS to notable outperformance vis-à-vis its benchmark. Even amidst the challenging milieu enveloping Chinese markets in the short term, relative performance has remained robust, albeit against a backdrop of adversity. However, this commendable performance has paradoxically led to FCSS trading at a significant discount to its net asset value (NAV), approximately 9% wider than its five-year average. To address this, the board has undertaken proactive measures, including share buybacks, as part of their strategy to mitigate discounts.
The recent amalgamation with abrdn China, finalized in March, has augmented FCSS’s asset base and is anticipated to contribute towards lower charges, thereby enhancing overall efficiency.
As the preeminent China Investment Trust in the UK, Fidelity China Special Situations PLC (LON) leverages Fidelity’s robust network of locally-based analysts to unearth compelling opportunities in a market too substantial to overlook.
