Cash in on China’s long-term growth with three competitive stocks
Dale Nicholls, portfolio manager of the Fidelity China Special Situations Trust, highlights three Chinese companies with scalable growth potential
The trust aims to provide investors with access to a wide range of opportunities in China, leveraging the unique advantages of its structure, such as the ability to use gearing, invest in private companies, and employ derivatives. I look for firms with scalable growth potential, strong returns on capital based on a clear competitive advantage and strong management.
These often align with secular growth trends, but I pay close attention to cyclicality, as it can also present opportunities. I prioritise management teams with a proven record of strong execution and favour under-researched small- and mid-cap stocks capable of outperforming the market.
Where to invest in China
One company I have invested in is Medlive Technology (Hong Kong: 2192). It operates a leading online platform connecting pharmaceutical and medical device companies with doctors, providing medical information, clinical guidelines, and diagnostic tools.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Its core strength lies in digital healthcare marketing, and it is benefiting from the ongoing shift of healthcare budgets from offline to online channels. Medlive has demonstrated robust growth, with its client base and the number of products promoted rising significantly.
Despite recent anti-corruption crackdowns, the long-term outlook for drug and medical device development in China remains strong, driven by a shift from sales and promotion to increased investment in research and development.
As more new drugs are developed, pharmaceutical companies will require enhanced marketing support. Medlive, with its focus on precision digital marketing, is well-placed to benefit from this transition. With limited competition and ample reinvestment opportunities, Medlive remains a compelling long-term growth story.
Ping An Insurance (Hong Kong: 2318) is one of China’s leading financial services providers, offering a wide range of insurance and investment products. China’s insurance sector remains underpenetrated compared with Western markets, presenting strong long-term growth potential.
Ping An is well positioned to capitalise on this, benefiting from robust demand in life insurance, particularly in elder care and critical illness coverage. It is gaining efficiency through investment in technology and bolstering risk control through better asset-liability management, tighter underwriting standards and improving the sales force’s skills. Meanwhile, the stock is attractively valued at a discount to book value, with strong capital return policies delivering an appealing dividend yield.
Tuhu Car (Hong Kong: 9690) is China’s leading car services provider, leveraging digitalisation to transform customers’ experiences, standardise services, and drive efficiency. The company’s platform integrates booking, parts ordering, service tracking, and technical support, creating a highly scalable, capital-light model.
In a fragmented market dominated by small local players, Tuhu has consolidated its position as the largest player, with over 4,000 franchised stores. China’s ageing car fleet is fuelling demand for maintenance, and Tuhu’s scale – it is one of the world’s largest purchasers of tyres – gives it significant pricing power.
The group also has substantial scope for expanding its margins through private-label products, increasing offline traffic, and enhancing high-value chassis services. The trust first invested in Tuhu as a private company, so I’ve known it for a long time. With few direct rivals and a proven growth strategy, it still stands out as an attractive long-term investment.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Dale Nicholls joined Fidelity International in 1996 as a Research Associate in our Tokyo office. In 2003, he was promoted to portfolio manager of the Fidelity Pacific Fund and retains management of that fund today. He was appointed as portfolio manager of Fidelity China Special Situations PLC in 2014. Prior to joining Fidelity, Dale worked at Bankers Trust Asia Securities in Tokyo and as a Market/Business Analyst at Sony Corporation, also in Tokyo. He graduated from the Queensland University of Technology in Australia.
-
Family investment companies explained: how the ultra wealthy shield their money from the taxmanWealthy families are increasingly turning to family investment companies to keep more of their money away from HMRC – but what are these arrangements and how do they work?
-
How to boost your pension pot as 35% of UK over 50s face huge retirement savings gapOver 50s are facing a later life with little to no funds - but there are steps you can take now to boost your pot.
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Cash in on the vast growth potential of the companies electrifying the worldOpinion Martin Todd, portfolio manager, head of sustainable equities, Federated Hermes, highlights three electrification companies where he'd put his money
-
Galliford Try has firm foundations for strong growthBuilder Galliford Try has a finger in a wide range of pies, notably important work in the public sector
-
Card Factory is a stand-out small-cap going cheapIn a digital world, we still value the personal touch. That’s good news for Card Factory, whose unique business model is suited to weather all economic storms
-
8 of the best smallholdings for sale nowThe best smallholdings for sale – from a medieval cross-passage farmhouse in Taunton, Somerset, to a former farmhouse with an orchard in the Welsh Marches
-
How much gold does China have – and how to cash inChina's gold reserves are vastly understated, says Dominic Frisby. So hold gold, overbought or not
-
How to invest in undervalued gold minersThe surge in gold and other precious metals has transformed the economics of the companies that mine them. Investors should cash in, says Rupert Hargreaves
-
Debasing Wall Street's new debasement trade ideaThe debasement trade is a catchy and plausible idea, but there’s no sign that markets are alarmed, says Cris Sholto Heaton
