For two fund managers at Fidelity International, recent stimulus announcements in Beijing were important enough for them to buy more distressed real estate stocks. Chinese authorities have issued a series of additional measures since late September that range from cutting interest rates and extending financial support to finishing the construction of apartments that have already been sold. “This round of policy pivot is very important in the sense that it is (a number of) well-coordinated supportive measures issued by different levels of government agencies,” Teresa Chu, a fund manager at Fidelity International, told CNBC in an interview. Wednesday. “We have moderately increased our profile in China,” Zhou said. Following the policy announcements in September, it said the company had become more positive on “certain cyclical names” in China's real estate sector, after previously focusing on online platforms in the sector. She added that if household confidence returns, this could pave the way for property prices to stabilize, especially in major cities in China. As of late 2023 and early this year, Chu said she was concerned about a downward housing cycle given relatively high inventories and low home prices. Zhou and Ben Li are co-managers of Fidelity's Greater China Fund. The company does not disclose exact stock transactions. “We have selectively increased positions in high-quality companies in the consumer and real estate sectors for example,” Lee said. “With respect to the consumer and real estate sectors, we believe they have been hurt by the macro challenges of the last few years (and with policy some may start to see incremental improvements.” “We believe experience-based consumption will continue to do well,” he said, pointing to the company’s investment in agencies Online Travel One of the top 10 holdings in Fidelity's Greater China Fund is Chinese online booking platform Trip.com and in McKinsey partner Daniel Zipser's latest assessment of Chinese consumer sentiment, he noted real estate transactions in October and the first half of November. It rose 2%, the first increase this year according to the company's daily analysis. “It's fair to say that October saw a slight uptick in consumption, which created positive momentum,” Zipser said. While China has not offered cash to the public, authorities have used targeted trade. Subsidies to stimulate purchases of home appliances and other expensive goods Companies, such as Alibaba, have noticed an increase in sales, and analysts at Nomura Bank said in a note dated November 20 that these exchange measures have helped increase the sales of TV screens in China since the quarter. the third. They estimate that in a sign of growing demand, utilization of TV production lines at BOE and TCL Technology is likely to increase in November compared to October. Nomura Bank rates the two Chinese electronics companies, listed on the Shenzhen Stock Exchange, as buy. Fidelity Fund managers emphasized that their strategy focuses on selecting companies based on their individual competitive advantage. They added that it will take time to see the impact of the stimulus, and said they are monitoring upcoming government meetings in December and March for more policy details. China's top leaders usually meet in mid-December to discuss economic plans for next year. These measures and growth targets will then be announced at a meeting of Parliament in March. “The positive change from this stimulus package removes tail risk and sets a floor for the market,” Chu said, noting that she is “cautiously optimistic.” Earnings comments in the last two weeks from major Chinese companies have highlighted how it will take time to see the impact of the stimulus. “When we talk to companies on the ground after earnings, it is positive that we sense some improvement in their tone in terms of enterprise confidence as well as their expectations for next year,” Zhou said. Regarding geopolitical risks, she noted that Chinese companies have built their supply chain abroad, making them more prepared today than they were several years ago to threaten President-elect Donald Trump with tariffs.
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How fund managers at Fidelity International view China's stimulus plans
