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Fidelity China NAV jumps 7% in a day after Alibaba windfall

Dan Jones
Written By:
Dan Jones

The net asset value of the Fidelity China Special Situations trust rose by 7 per cent on Friday following Chinese e-commerce site Alibaba’s record $25bn IPO.

The trust’s holding in the previously-unlisted company accounted for 4.6 per cent of its portfolio as of 30 June, making Alibaba its second largest holding.

After months of speculation and a feverish listing process, the internet giant listed in New York on Friday at $68 a share. A 38 per cent rise in its share price during the day meant the company ended last week with a value of some $230bn.

As a result, Fidelity China Special Situations’ net asset value stood at 137.86p per share by Friday’s close, a rise of 7.4 per cent from Thursday’s closing NAV of 128.4p.

The board of the trust, managed by Dale Nicholls (pictured), said today the NAV rise reflects “the significant increase in the value of the company’s investment in Alibaba resulting from its listing on the NASDAQ.”

The listing makes Alibaba one of the world’s most valuable companies, exceeding the expectations of the trust’s previous manager, Anthony Bolton.

Bolton said last summer that he expected Alibaba to list at the end of 2013 for around half of its current valuation – though those comments came at a time when the company was expected to list in Hong Kong, rather than New York.

“The trust will make a decent amount of money as the company is expected to be valued at $70bn-$100bn,” Bolton said at the time.

Fidelity China Special Sits has returned 25.9 per cent over the past year, according to FE, but analysts at Winterflood recently cautioned over the outlook for the trust.

The broker said it is “not clear” whether Fidelity has the resources to cover a specialist mid- and small-cap Chinese equities portfolio.

“Performance has picked up again in the last few months and, in the short term, the IPO of Alibaba could provide a fillip,” Winterflood said at the end of July.

“However, we believe that a gearing level of greater than 20 per cent of net assets is unwarranted, given the risks involved in the asset class. In addition, the board has been remiss, in our view, in not providing a tender offer, given the widening discount.”

The trust sat on a discount of 4.6% last week, prior to the sharp move in its NAV.