Fidelity China Special Situations (FCSS) beat the MSCI China index in the 12 months to 31 March, although the uncertainty exacerbated by the Iran war sharply reduced its returns from the first half of its financial year when the portfolio advanced 29.7% in a relief rally after the US watered down its initially aggressive tariffs. Backed by gearing of around 20%, FCSS’ underlying total return of 10.7% beat the benchmark’s 1.6% gain, annual results show, but shareholders in the £1.3bn investment trust had to settle for a 9.5% annual return as the discount to net asset value widened slightly to 8.5% from 7.3%. A sole dividend of 9p per share rose 12.5% from last year. Consumer and IT stocks did particularly well with the growth in autonomous driving boosting the likes of laser detection equipment provider Hesai and robotaxi platform Pony.ai. Fund manager Dale Nicholls’ high conviction positions in Full Truck Alliance and Tuhu Car weighed on returns as their shares fell. While high oil prices from the conflict in the Middle East added to the pressure on some internet stocks, the company said China’s strategic oil and coal reserves and fast growing renewables sector meant it was less reliant on oil imports, while the country’s increasingly innovative corporate sector was a real source of optimism for the future. FCSS is the best performing China trust over 10 years with a total shareholder return of 148.5%, but over the past 12 months its 14.5% gain has lagged rivals Baillie Gifford China Growth (BGCG) and JPMorgan China Growth & Income (JCGI) which have both risen over 24%.
James Carthew, head of investment company research at QuotedData, said: “Another decent set of results from Fidelity China driven by the stock-picking skills of the management team. The technological prowess and manufacturing efficiency of Chinese businesses underpin earnings growth, the tariff impact was shrugged off, and the attempt to hold back Chinese progress on AI feels doomed to fail. Stocks are not overvalued, on average, and if the missing element of the Chinese economy – domestic consumption – is unlocked, we could see considerable outperformance by Chinese equities. I am a happy holder of Fidelity China.”
Half-year results from Barings Emerging EMEA Opportunities (BEMO) also bore the impact of the Iran war with shareholders seeing a 4.7% loss in the six months to 31 March despite a 3.3% underlying total return from the portfolio. That underperformed the 6.1% rise in the MSCI EM EMEA index but could have been worse given the £90m investment trust’s 29% weighting to Saudi Arabia which returned 3%, proving more defensive than other markets in the region. “Despite the volatility, we continue to highlight the benefit of the region’s diversity,” said Baring fund managers Matthias Siller, Annan El-Araby and Alay Patel.
Montanaro European Smaller Companies (MTE), a £227m investment trust on an 8% discount, has published a circular for its second tender offer since it adopted a policy of providing regular exits in March 2025. Shareholders will be able to sell up to 5% of the company’s shares at a price 5% below net asset value.
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