Fidelity Emerging Markets Ltd on Wednesday highlighted consumer confidence as a big challenge for China, but also said that the present time is an attractive entry point for emerging market equities.

The investment fund focused on high-growth emerging markets within Africa, South Asia, Latin America, and Europe said net asset value per participating preference share rose 15% to $10.09 as at June 30 from $8.75 a year ago.

NAV total return was 18.7% in the financial year ended June 30, outperforming the benchmark MSCI Emerging Markets index which had a total return of 13.2%. It was also a marked improvement from Fidelity Emerging’s negative total return of 2.6% in financial 2023.

The company declared a final dividend per share of 20 US cents, up 5.3% from 19 cents a year prior.

Looking ahead, Fidelity Emerging said China remains ‘key’ to its outlook. However it noted that it was emerging from a period of significantly negative sentiment towards the country while structural problems persist, with a big challenge being consumer confidence.

Perhaps more positively, Portfolio Managers Nick Price and Chris Tennant said: ‘Another driver for emerging markets is the exposure it offers to the AI supply chain. While US companies are typically thought of as AI beneficiaries, what is often overlooked is the fact that the bulk of the AI supply chain sits in emerging markets like Taiwan.

‘Indeed, Jensen Huang, Nvidia [Corp]’s chief executive officer, has said that Nvidia wouldn’t be the company it is today without Taiwan’s [Taiwan Semiconducutor Manufacturing Co, known as TSMC], which manufactures Nvidia’s AI chips.’

They continued: ‘Given the discount that emerging markets are trading on relative to the US, the emerging market universe offers exposure to the AI supply chain at much more attractive valuations.’

Fidelity Emerging shares were 0.2% higher at 684.00 pence each on Wednesday morning in London.

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