How businesses deliver on their earnings commitments will be a key consideration for investors in Chinese equities over the course of 2024, says Fidelity China Special Situations portfolio manager Dale Nicholls in this video interview for Portfolio Adviser.
“Earnings is what really matters,” he tells Portfolio Adviser editorial director Julian Marr. “Just making sure companies can execute on their strategy and seeing that play out in earnings will be the most important thing to watch out for.
“It is interesting that, despite all we have talked about in terms of challenges for the economy, earnings growth has actually been pretty good. I talked about the job cuts we have seen in the tech sector, for example, but the other side to that is that has delivered pretty significant cost-cuts and earnings upgrades.”
Fidelity China Special Situations is set to absorb the assets of rival trust Abrdn China, which will then be wound up, in a deal that would create a trust with total assets of some £1.6bn. The proposals, which are subject to approval by both sets of shareholders, are expected to be effective by the end of March 2024.
In this interview, Nicholls also reviews how the Chinese market fared over 2023, discusses changes he made to his portfolio through the year and offers his thoughts on how the ever-present question of government policy is currently affecting both the prospects for businesses and his own thinking in relation to future investments.You can view the whole video by clicking on the picture above, while the timecodes for each question are set out below:
00:22 What have been the main issues affecting Chinese equities in 2023 and how have they fared versus other assets over the year?
01:37 What has that meant for your portfolio and what changes have you made to allocations over 2023?
02:35 Government policy is always a big consideration for investors in China – what is your current take here?
03:57 Is there a tangible link between Chinese government policy and the returns you see from a portfolio?
05:15 Given what we have discussed so far, are you finding any sectors especially interesting – or worrying?
07:03 Finally, as an investor in China, are there any developments you will be particularly looking out for in 2024?