Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

‘Tis the season. Well, not quite, but that hasn’t stopped the first Christmas adverts from appearing on our screens. Even if there’s not too much festive cheer in the air, we are now well on the road towards the most wonderful time of the year (for retailers).

Businesses and investors alike will hope the pandemic won’t affect spending levels over 2020’s Black Friday and Christmas holidays. Though we’re unlikely to be flocking to the high streets, the rise of online shopping may provide something of a lifeline.

The extreme profitability available through e-commerce was evident during this week’s Singles Day in China.

Starting out as a festival celebrating singleness by students in Nanjing, Chinese e-commerce giant Alibaba has turned Singles Day into the world’s largest online shopping festival. The date falls on the 11th of November and is purposely chosen because it features four ‘ones’ - 11 /11. What began in 2009 as a collaboration between just 27 retailers in a bid to promote online shopping, has now morphed into a 200,000 merchant-strong emblem of Chinese consumerism.

This year’s spending bonanza yet again smashed records, with sales reaching around $75 billion, an increase of 26% when compared to the same timeframe as last year (this year’s was extended due to the pandemic).

The event’s success told us much about China’s remarkable market recovery, while denoting an unnerving contrast to our own.

11/11 fell at a markedly different point along China’s coronavirus recovery than Black Friday and Christmas will along the West’s. It took on a unique resonance this year in demonstrating the nation’s success in battling the pandemic. ‘First in, first out’, China has exhibited stronger-than-expected economic recovery since effectively quashing the virus, with its stock market buoyed by outperformance in tech, consumer and healthcare sectors. Chinese equities are now up over 20% in 2020, according to MSCI, after rallying from their nadir in March.

Investors will be encouraged too to see that earnings growth has largely tracked rising valuations, while the domestic policy backdrop has appeared favourable too.

Tensions have risen recently, however, with regulators calling a last-minute halt to the highly anticipated - and largest ever - IPO of Ant Group, Alibaba’s affiliate company. The move appears to have come amid efforts to rein in China’s largest tech firms. Still, Chinese consumers didn’t seem bothered. The success of this year’s Singles Day paid testament to the country’s impressive recovery.

All that contrasts unsettlingly with the situation back home. On the economic front, the UK’s underperformance over the course of 2020 - and beyond - has been clear to see.

Most glaringly, the twin spectres of rising infection levels and lockdowns, both of which have long left Chinese shores, continue to loom ominously over Europe. While businesses had hoped that spring’s lockdowns would simply delay consumption to a later date, the latest restrictions bring the added threat of narrowing the window of opportunity before Black Friday and Christmas.

On the flipside, a Christmas spent in lockdown could shift consumption habits more than consumption levels. Money saved on parties and meals may be used to buy more online gifts. And while average savings accrued over this lockdown will be lower than spring’s, they could still bolster the outlay.

Given too that Christmas Day is apparently beyond sacrifice, there is significant pressure on the government to ensure that we’re at least out of lockdown come the 25th, even if things aren’t quite ‘back to normal’.

Nevertheless, all our efforts to rescue Christmas from Covid’s clutches while Singles Day roared with success exemplify the extent to which China’s recovery story stands apart from our own, which is yet to really begin.

If you’re looking to invest in China, our Select 50 offers a number of ways to do so. The Matthews Asia Pacific Tiger fund and the Fidelity Asian Special Situations fund both take significant positions in Alibaba.

Five year performance

(%) As at 31 Oct

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
MSCI China 3.0 38.3 -18.4 12.0 31.3

Past performance is not a reliable indicator of future returns

Source: MSCI, as at 31.10.20, price index in local currency terms

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. The Fidelity Asian Special Situations Fund may use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Currency hedging is used to substantially reduce the effect of currency exchange rate fluctuations on undesired currency exposures. There can be no assurance that the currency hedging employed will be successful. Hedging also has the effect of limiting the potential for currency gains to be made. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Topics Covered:

Active investing; Funds; Asia and emerging markets

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