This latest interview by the Fund Calibre team explores the current state of Chinese equity markets. Dale Nicholls, manager of the Fidelity China Special Situations Trust, highlights how domestic regulation, energy price pressures, and global AI investment trends are reshaping opportunities for investors.
Exploring Chinese equity markets, this interview hasa focus on shifting sentiment, policy developments, and the widening divergence between sectors.
We also cover tariffs, earnings revisions, property stabilisation and the potential for improving consumer demand driven by wealth effects and policy support.
It also examines sector rotation, AI-driven capital expenditure, and opportunities in property, healthcare, and industrials, alongside the role of valuation, offshore expansion, and long-term capital return trends in shaping market performance and overall investment outlook implications for investors.
Why you should listen to the interview: A rare insight into how shifting global forces and domestic policy are reshaping one of the world’s most complex equity markets.
The discussion breaks down where real opportunities are emerging beneath headline volatility, offering clarity on sentiment, sector divergence and long-term value creation across a wide range of industries globally.
This interview was recorded on 17 June 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Tech winners vs laggards
“I think it’s the sector bifurcation that’s really standing out more now. So again, there are big companies that are benefiting from that sort of CapEx in AI that we talked about and potentially improving things in sort of the EV sector as well, so that, again, I come to, the big battery names like CATL that are clearly benefiting from that.
“But at the same time, if we’re talking about big tech we’ve definitely seen a trend that the companies that are benefiting from the CapEx are clearly outperforming the spenders themselves.
“So, you’re seeing rising CapEx from the big tech names, the big cloud providers, Alibaba, Tencent, et cetera. They’re definitely increasing their CapEx.
“And clearly the market’s taken a dim view of that because it does have, I guess, the impact to short-term cash flows and earnings.
“To me in some ways that feels a bit overdone. I think the key question you need to be asking is: will the returns be there on that CapEx? And the early signs I think are that the returns will be there, obviously something we need to watch.”
Tariffs, earnings pressure and property stabilisation
“On the tariff side, obviously you’ve seen a lot of developments that have played out, and it’s still unclear how things will play out from the US side.
“But what I would say is that I think myself, and probably most market participants, are feeling more comfortable about that. Not least because it’s not just China anymore in terms of who’s going to be suffering from tariffs.
“It’s more of a global issue. If anything, in terms of the gap between China and other countries, it looks like that gap is closing. As we’ve talked about, Chinese companies have a lot of experience dealing with tariffs over the years.
“They’re very flexible. A lot of them have taken steps to move production offshore. So I’d say overall, tariffs are less of an issue.
“Your question about earnings is very valid. Again, if I think about China versus the US market, that’s an area of weakness because generally we’ve seen revisions downward in China. I do think the ingredients are there for things to improve.
“I’m sure we’ll talk about things like the property sector, where I think there are clear signs of stabilisation. If we have that, there’s still a consumer sitting there very cashed up, having underspent for years.
“That, combined with the AI spend we talked about, we see the contribution to overall economic growth that’s providing in the US. Obviously that CapEx cycle has been much smaller in China, but again, the signs are that it’s accelerating.
“That, combined with the fact that pretty much all companies are doing more offshore, means better margins. For companies that do have overseas businesses, in most cases, given the competitiveness of the market domestically, they make better margins offshore. So that’s a factor that can slowly contribute to better earnings.”
Industrials, healthcare and long-term opportunities
“I think definitely those are promising areas, but for quite different reasons. Industrials, for everything we’ve talked about, you’ve got many companies benefiting from the CapEx spend we discussed.
“And as I’ve mentioned in the past, I still have the sense that the market doesn’t fully appreciate the competitiveness of many companies.
“Given the scale of their businesses and the investments they’ve made in R&D over time, there are very few sectors where companies in these areas are losing market share. They’re generally market share gainers.
“The healthcare sector is a bit bifurcated. We’ve seen decent performance in the more innovative drug areas, and I think that’s justified. There’s obviously a huge amount of innovation happening in that space, and that’s been recognised by global pharma.
“They’re beating down the door to China to license many of the novel drugs coming out. There’s been weakness elsewhere in the market. The hospital area has suffered.
“There have clearly been funding issues and pricing pressure. That’s driven valuations to very attractive levels. But our sense is that the bad news flow there is probably coming to an end.
“On the consumer side, there are still real structural growth stories, combined with the potential for things to slowly improve. Think about services, travel, and sportswear, where per capita spend is still far below Western levels.
“And in private markets, there’s still a lot going on. Performance continues to be very strong, and there’s still potential for value to be realised if monetisation improves internationally.
“Over time, patience remains key, because markets don’t always recognise good companies quickly, but earnings and valuation ultimately win out.”
Conclusion: While short-term volatility remains, improving earnings dynamics, stabilising property markets, and rising capital return policies suggest a more constructive backdrop over time.
Dale emphasises that opportunities exist where mis-pricing persists and sentiment remains overly cautious across different sectors.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
Main image: China, gundam-YxJVijPhzfg-unsplash
