Fidelity China Special Situations PLC on Tuesday reported a swing to an annual loss and a sharp fall in net asset value, due to a resurgence of Covid-19 cases in China and increased regulation related to China’s zero-Covid policy.
The China-focused investment trust swung to a pretax loss of £752.6 million in the year ended March 31 from a profit of £991.4 million the year before.
Net asset value per share stood at 272.52 pence as at March 31, a sharp 55% fall from 423.50p on the same date a year before.
The company’s total NAV return fell 35% in the year, underperforming its benchmark, the MSCI China Index, which declined 29%.
Fidelity blamed this on a resurgence in Covid-19 cases, fears over China‘s slowing growth, and increased regulation due to the country’s zero-Covid policy - A public policy that aims to control and suppression the virus as much as possible.
‘Slowing economic growth - notably slowing consumer activity highlighted in data points such as retail sales - has been exacerbated by the recent Covid lockdowns that we have seen in large cities such as Shanghai. The feedback from consumer related businesses in the region indicate that the impact will be significant in the short-term,’ Portfolio Manager Dale Nicholls said.
The company recommended a total dividend of 5.50 pence per share, reflecting an 18% year-on-year increase from 4.68p.
Looking ahead, Fidelity warned that its NAV and share price might be hurt by further ‘volatility’.
‘However, I remain positive on the long-term potential of the Chinese consumption theme and believe that there is good potential for the unleashing of spending power as the country comes out of the pandemic,’ Portfolio Manager Nicholls added.
The company also announced that Chair Nicholas Bull will retire from the board and on July 20. He will be replaced by Mike Balfour, who is currently serving as chair of the Audit & Risk Committee.
Fidelity China shares were trading 1.0% higher in London on Friday morning at 249.50 pence each.
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