Fidelity China Special Situations (FCSS ) has completed its all-share merger with Abrdn China (ACIC ), boosting its £1bn portfolio by £127m.

Following final approval by Abrdn China shareholders yesterday, Fidelity China will issue 59m new shares to buy the £126.6m of net assets transferring from the now delisted ACIC.

Had Abrdn China shareholders had their way it would have been far less as just 12% of the £190m trust opted to roll over their stakes into FCSS, with 88% electing to take cash.

However, although the cash option was heavily oversubscribed, it had been limited to a third of ACIC shares, meaning £63m is returned to shareholders. Leading discount hunters City of London, Allspring, and Lazard owned 70% of the stock ahead of the merger.

The transaction leaves just three London-listed China funds and enshrines the Dale Nicholls-managed Fidelity China as the sub-sector’s biggest. FCSS now towers over its two rivals, the £119m Baillie Gifford China Growth (BGCG ) and £179m JPMorgan China Growth & Income (JCGI ).

All three stand on share price discounts of around 10% below net asset value. That and the high level of cash elections at ACIC indicate a lack of enthusiasm for China whose stock market has struggled with Covid and political interventions in the past three years, broadly halving the shares of the three funds.

The past month may indicate a turning point, however, with the MSCI China index rallying 7% in sterling terms, a gain that has been roughly matched by the three investment trusts. 

Fidelity is waiving its management fee on the ACIC assets for eight months and contributed £500,000 to merger costs.