Fidelity China Special Situations Upgraded by Analysts

Morningstar analyst David Holder explains why the team has upgraded the Morningstar Analyst Rating from Neutral to Bronze

David Holder 8 August, 2017 | 3:02PM
Facebook Twitter LinkedIn

 

 

David Holder: Following a recent meeting with Dale Nicholls, fund manager of the Fidelity China Special Situations Trust (FCSS), we've upgraded the Morningstar Analyst Rating from Neutral to Bronze. The key driver of our increased confidence is the quality and assuredness of the management of Dale Nicholls. Whilst his tenure here is relatively short - he formally took over from Fidelity legend Anthony Bolton in April 2014 - his investment experience with the Chinese market goes back to 2003 when he began managing the successful Fidelity Pacific Fund, which has a significant exposure to Chinese equities.

The investment process is another area of conviction: it is entirely bottom up with Nicholls permitted significant latitude to deviate from the index at the stock and sector level. This means that he is free to pursue the best opportunities available within this dynamic economy, without being exposed to less attractive areas of the market.

Nicholls has been at Fidelity since 1996 and is thus well positioned to utilise its extensive global research analyst capability, including that of a dedicated small-cap analyst, which is salient given the small and mid-cap bias within the portfolio.

In 2016 shareholders approved an increase in the limit of unlisted investments from 5% to 10%. This adds an interesting and fairly unique element to the fund as does the ability to short indices for portfolio hedging, and short individual stocks where the valuations are elevated and business is structurally flawed. These elements of the portfolio are relatively modest, but we feel add incrementally to the overall proposition.

All told we think that the fund has considerable merit for investors seeking access to this dynamic and increasingly relevant equity market. There will be bumps along the way given the structure of the portfolio and the nature of the market, but we feel that Nicholls is a good fit for this fund given his talents and experience within the region. In recognition of these factors and his promising start we've upgraded the Morningstar Analyst Rating to Bronze from Neutral.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fidelity China Special Ord219.00 GBX0.46Rating

About Author

David Holder  is a senior investment research analyst at Morningstar

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures