‘China’s crackdown is past its peak – investors need to pile in’

Chinese stocks have had a difficult year following successive government crackdowns that wiped nearly 40pc off the value of its leading companies.

The Chinese Communist Party tightened rules for tech firms such as Alibaba and Tencent and effectively tried to nationalise its online education sector. Simultaneously, it strong-armed firms into donating profits to wealth redistribution programmes.

These anti-capitalist measures saw international investors flee and share prices suffered as a result. However, with a growing economy already five times the size of Britain’s, lower share prices could offer investors the perfect opportunity to buy back in.

Dale Nicholls, manager of the £1.6bn Fidelity China Special Situations investment trust, has remained optimistic and even doubled down on owning Chinese tech giants.

The trust’s shares stand 19pc lower than in July but Mr Nicholls says China’s long-term growth prospects remain positive and offers suggestions on which sectors look the most promising.

Who is the fund for?

China is so big that it should be a part of everyone’s portfolio. We are set up to own a broad spectrum of the market, including private companies and smaller stocks.

How do you pick stocks?

The first thing is to estimate how big a company can be in 10 to 15 years. Second, I look at cash generation: a lot of businesses are growing but don’t generate any money or grow their competitive advantage – we want to avoid them. Finally, I focus on the management and make sure they’re able to drive the company’s vision.

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