**Summary of Fidelity China Special Situations PLC Half-Yearly Report (Six Months Ended 30 September 2025)**
**Financial Highlights**
**Ordinary Share Price Total Return** +28.7%
**Net Asset Value (NAV) Return** +29.7%
**Benchmark (MSCI China Index) Return** +18.0%
**Key Contributors** Core holdings in consumer and industrials sectors, aligned with advanced manufacturing and innovation themes.
**Macro and Market Context**
**Chinese Equities Rally** Strong performance driven by innovation-led sectors, policy support, and improved investor sentiment.
**External Demand** Robust global manufacturing demand, particularly in automation, EVs, and advanced manufacturing.
**Domestic Challenges** Weak consumer confidence due to a subdued property market, though early signs of stabilization in tier-one cities.
**Policy Support** Targeted fiscal and monetary measures, focus on innovation, and the "anti-involution" campaign to reduce excessive competition.
**Portfolio Performance**
**Outperformance** NAV rose by 29.7%, significantly outpacing the MSCI China Index (+18.0%).
**Top Performers**
**Hesai Group (Automotive LiDAR)** Returned to profitability, robust revenue growth, and planned Hong Kong listing.
**Pony.ai (Autonomous Driving)** Strong business development, new approvals, and progress toward profitability.
**Dongfang Electric and Morimatsu International (Industrials):** Benefited from major projects and global pharma sector recovery.
**Limited Exposure** Avoided underperforming sectors like EVs (BYD, Xiaomi) and e-commerce (Meituan, JD.com), which faced margin pressures.
**Portfolio Positioning**
**Focus Areas** Domestically driven sectors like healthcare, consumer, and industrials, with emphasis on scalable growth and strong management.
**New Investments**
**Xtep International (Sportswear)** Benefiting from trading-down trend and premium brand growth.
**China Resources Beer** Attractive valuations and premiumization strategy.
**Trip.com** Increased exposure post-share price weakness, leveraging long-term structural growth.
**Alibaba** Increased holding due to improving e-commerce fundamentals and cloud business growth.
**Aux Electrics (Consumer Durables)** Positioned for affordable product demand and emerging market exposure.
**HashKey Holdings (Unlisted Crypto Exchange):** Leveraged exposure to Hong Kong’s regulated crypto market.
**Reduced Exposure** Profit-taking in financials (Ping An Insurance) and exited consumer finance lenders (LexinFintech, QFin Holding) due to regulatory uncertainty.
**Gearing and Discount Management**
**Net Gearing** Fell to 19.6% from 20.5%, contributing positively to returns (+3.0%).
**Share Repurchases** Repurchased 9,033,042 shares for cancellation, reducing discount volatility and increasing NAV per share.
**Outlook**
**Constructive Environment** 15th Five-Year Plan, technological self-sufficiency, and improved US-China trade relations.
**Policy Support** Targeted fiscal easing and flexible monetary tools.
**Structural Strengths** Global leadership in manufacturing, innovation, and technological upgrading.
**Valuations** MSCI China Index trades at 13x forward earnings, 40% below S&P 500, offering selective opportunities.
**Focus** Companies with durable earnings, structural growth themes, and disciplined capital allocation, particularly in advanced manufacturing, automation, and technology-enabled industrials.
**Top Five Holdings (as of 30 September 2025):**
1. **Tencent Holdings (14.3%)** Dominant digital ecosystem, leveraging AI for user engagement and monetization.
2. **Alibaba Group Holding (9.5%)** Leading e-commerce and cloud computing, strategic focus on efficiency and AI.
3. **PDD Holdings (4.9%)** Efficient supply chain and international expansion via Temu.
4. **ByteDance (Unlisted, 3.7%)** Strong international presence, under-monetized platforms with significant upside.
5. **Pony.ai (2.7%)** Autonomous driving leader, benefiting from policy support and commercial rollout.
**Risks**
**Geopolitical Tensions** US-China trade, Taiwan relations, and North Korea.
**Climate Change** Impact on investment valuations and regulatory costs.
**AI Risks** Opportunities and threats from rapid technological advancements.
**Conclusion**
Fidelity China Special Situations PLC delivered strong performance, outpacing the benchmark through strategic positioning in innovation-driven sectors and disciplined portfolio management. The company remains optimistic about China’s structural growth opportunities, particularly in technology and advanced manufacturing, while navigating cyclical challenges and geopolitical risks.
| Metric | 30 Sep 2025 | 30 Sep 2024 | 31 Mar 2025 | Change YoY | Change Half Year |
|---|---|---|---|---|---|
| Net Assets (£'000) | 1,741,776 | 1,302,117 | 1,413,802 | +33.8% | +23.2% |
| Net Asset Value per Share (pence) | 358.53 | 252.18 | 285.71 | +42.2% | +25.5% |
| Total Equity (£'000) | 1,741,776 | 1,302,117 | 1,413,802 | +33.8% | +23.2% |
| Total Long Exposures (£'000) | 2,347,804 | 1,655,634 | 1,672,925 | +41.8% | +40.3% |
| Net Gearing (%) | 19.6% | 20.5% | 20.9% | -4.4% | -6.3% |
| Ongoing Charges Ratio (%) | 1.07% | 0.74% | 0.89% | +44.6% | +20.2% |
| Profit After Taxation (£'000) | 397,629 | 178,503 | 338,012 | +122.8% | +17.6% |
| Earnings per Share (pence) | 80.92 | 34.25 | 65.93 | +136.3% | +22.7% |