Fidelity’s Nicholls hikes Chinese A share exposure

Fidelity’s Nicholls hikes Chinese A share exposure

Fidelity’s China Special Situations manager Dale Nicholls has been exploiting a new route which provides access to companies listed in the world’s second largest economy.

The manager has been upping his exposure to shares of companies listed on the domestic Chinese stockmarket through the Hong Kong-Shanghai Connect, which has made it easier for foreign investors to buy Chinese stocks.

Prior to the Connect, companies had to apply for licences to buy domestic stocks, known as A shares, and each licence only gave companies a limited amount of exposure.

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Mr Nicholls said using the Connect - which has been open 100 days this week - had been a key part of his recent overhaul of the trust.

The manager took on the £888m trust on April 1 last year, since which time the share price return in sterling has virtually matched the 28 per cent rise in the benchmark MSCI China index, according to data from FE Analytics.

Mr Nicholls said the A-share market was “fascinating” and that he had been “aggressively” buying such stocks since taking over the trust.

“The opening up of the A-share market is a big opportunity – it is full of the biggest companies you have never heard of,” the manager said.

Mr Nicholls said he particularly likes auto companies and technology companies. He has bought, Hangzhou HikVision, a digital technology supplier and Zhengzhou Yutong Bus, a manufacturer of large and medium sized buses. Both stocks make up 0.7 per cent of his portfolio.

Elsewhere, Mr Nicholls has reduced the fund’s allocation to financial stocks. At the end of December last year he was 16.4 per cent underweight the sector compared to the MSCI China index, according to the factsheet.

He owns no Chinese banks and is convinced they are not a good option given where the country is in the credit cycle and the amount of non-performing loans on banks’ balance sheets.