Last October, shares in Fidelity China Special Situations (FCSS) started to rally on hopes that a relaxation of Covid restrictions in China would help to lift the economy and benefit the companies in its portfolio. The shares went from circa 178p to 302p over the space of four months.Since then, nearly all those gains have faded away amid fears the China reopening story was weaker than previously expected. Those fears proved correct, with recent data showing disappointing tourist spending and weak exports.

Add in geopolitical issues such as the country’s fragile relationship with the US and the status of Taiwan, and it is clear why shares in the Fidelity trust are languishing on 10.9% discount to net asset value.

‘The biggest change post-Covid is the outlook for the consumer,’ said portfolio manager Dale Nicholls earlier this month in the trust’s full-year results. ‘While the recovery is bumpy and varies somewhat by sector, the path to recovery is clearly there.’

Nicholls said that while growth rates have tempered in the second quarter, he believes the government’s GDP target of 5% for the year looks achievable. ‘This will make China one of the few large economies that will see accelerating economic growth in 2023.’

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