25th Nov 2021 10:35
(Alliance News) - China-focused investment trust Fidelity China Special Situations PLC's portfolio manager, Dale Nicholls, noted concerns over increasing regulation in China.
Nicholls said: "Naturally, this remains a key concern for investors. In trying to understand and analyse the government's recent actions, I believe it is important to recognise some key points."
Firstly, he said, the "hand" of the government, coupled with regulatory direction and implementation, is core to the investment landscape in any market.
Secondly, he said that any of these crackdowns are addressing problems that confront countries globally - specifically around big tech.
On Saturday, Chinese technology firms including Alibaba Group Holding Ltd and Tencent Holdings Ltd were fined for failing to report corporate acquisitions, adding to an anti-monopoly crackdown by the ruling Communist Party. Meanwhile, earlier Thursday morning, Tencent was told all its new apps and updates must be approved by the Chinese government.
"Big tech and related challenges around anti-trust and data security and privacy are examples, as are the challenges around income inequality. While in many cases we can trace the path of regulation, unlike in most other countries, Beijing's implementation can be swift, which often roils markets," Nicholls said.
He also noted that the property sector has been under the spotlight of both policymakers and investors for some time.
"Reigning in property speculation is a crucial aspect of President Xi's vision of a more equal society - think back to 2017 when he commented that houses are 'for living in, not for speculation'," he said.
Fidelity China has benefitted from an underweight real estate exposure, coupled with an overweight position in the healthcare space.
"It clearly has been a volatile period, but we have seen times like this before, and most likely will see them again. While the combination of the risks I have outlined is negatively impacting sentiment towards China currently, history teaches us that these are usually the periods that offer the most attractive opportunities," Nicholls said.
Fidelity China shares were up 0.9% to 324.01 pence each in London on Thursday morning.
By Greg Roxburgh; [email protected]
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