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Asia Growth

Matthews Asia ESG Fund MASGX

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and eco­nomic impact in Asia ex Japan
  • Deep bottom-up fundamental approach with bias toward mid- and small-capitalization companies whose ESG qualities are less appreciated
  • Seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

04/30/2015

Inception Date

13.99%

YTD Return

(as of 07/30/2021)

$17.03

Price

(as of 07/30/2021)

$112.55 million

Fund Assets

(as of 06/30/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia ESG Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies of any market capitalization located in Asia that Matthews believes satisfy one or more of its environmental, social and governance (“ESG”) standards. The Fund seeks to invest in companies across the market capitalization spectrum that Matthews believes to be undervalued but of high quality and run by management teams with good operating and governance track records. In addition, the Fund seeks to invest in those Asian companies that have the potential to profit from the long-term opportunities presented by global environmental and social challenges as well as those Asian companies that proactively manage long-term risks presented by these challenges.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 04/30/2015
Fund Assets $112.55 million (06/30/2021)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 84.6%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.42%
Net Expense Ratio 1.38%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
4.08% 8.99% 14.46% 62.50% 19.27% 17.32% n.a. 12.18% 04/30/2015
MSCI All Country Asia ex Japan Index
-0.09% 3.66% 6.51% 40.03% 12.54% 14.82% n.a. 8.50%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
4.08% 8.99% 14.46% 62.50% 19.27% 17.32% n.a. 12.18% 04/30/2015
MSCI All Country Asia ex Japan Index
-0.09% 3.66% 6.51% 40.03% 12.54% 14.82% n.a. 8.50%
For the years ended December 31st
Name 2020 2019 2018 2017 2016
Matthews Asia ESG Fund
MASGX
42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 06/30/2021)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Ratings

  • OVERALL
  • out of 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 47 funds
  • 1 YEAR
  • 1st
  • 2 out of 28 funds
  • 3 YEAR
  • 1st
  • 2 out of 28 funds
  • 5 YEAR
  • 1st
  • 4 out of 26 funds
  • SINCE INCEPTION
  • 1st
  • 5 out of 25 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Portfolio Characteristics

(as of 06/30/2021)
Fund Benchmark
Number of Positions 51 1,204
Weighted Average Market Cap $31.1 billion $183.0 billion
Active Share 97.2 n.a.
P/E using FY1 estimates 20.5x 15.1x
P/E using FY2 estimates 16.0x 13.8x
Price/Cash Flow 19.7 10.3
Price/Book 3.2 2.1
Return On Equity 11.8 13.0
EPS Growth (3 Yr) 3.2% 15.5%

Sources: BNY Mellon Investment Servicing (US) Inc., Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 06/30/2021)
Name Sector Country % Net Assets
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 6.7
Shriram City Union Finance, Ltd. Financials India 6.1
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 5.1
Bandhan Bank, Ltd. Financials India 4.1
IndusInd Bank, Ltd. Financials India 4.0
Phoenix Mills, Ltd. Real Estate India 3.3
Legend Biotech Corp. Health Care United States 3.1
Micron Technology, Inc. Information Technology United States 3.0
Andes Technology Corp. Information Technology Taiwan 2.9
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 2.8
TOTAL 41.1

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 06/30/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Not all countries are included in the benchmark index(es).

Source: FactSet Research Systems.

Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/15/2020 12/16/2020 $0.00950 $0.39961 $0.43641 $0.84552 6.0% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended June 30, 2021

For the first half of 2021, the Matthews Asia ESG Fund returned 14.46% (Investor Class) and 14.54% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 6.51% over the same period. For the quarter ending June 30, the Fund returned 8.99% (Investor Class) and 9.06% (Institutional Class), while the benchmark returned 3.66%.

Market Environment:

From early February to early June, value stocks outperformed growth stocks in Asia as investors expected the strong global economic rebound from last year’s COVID-related slowdown to drive profit growth in economic cycle-sensitive industries. This view was further reinforced by investors’ belief that the U.S. Fed would let inflation run ahead of its target for a period of time to enable a stronger economic recovery. This scenario was also very conducive to the outperformance of small-cap stocks in relation to large-cap stocks. Not surprisingly then, the industrials, materials and energy sectors were also the best performing in Asia during the first half of the year, while the performance of consumer staples sector lagged alongside communication services and utilities sectors. However that trend moderated somewhat after the Federal Open Market Committee meeting in June, when the Fed signaled the potential for interest rate hikes sooner than expected, lowering the potential long-term growth overshoot from previous expectations.

During the first half of the year the best performing markets included Taiwan and India, while the worst performing market was COVID-impacted Indonesia. In terms of currencies, the Taiwanese dollar and Chinese renminbi appreciated the most during the first half of 2021. Meanwhile, the Japanese yen and Thai baht depreciated the most.

Performance Contributors and Detractors:

For the first half of the year, China and India were the biggest contributors to relative performance, while stock selection in Indonesia, along with our underweight in Taiwan, were notable detractors from relative performance. From a sector perspective, industrials, health care, consumer discretionary, information technology and financials all contributed positively, while the materials sector detracted relative to the benchmark.

Turning to individual securities, Chinese solar inverter manufacturer Ginlong Technologies was among the biggest contributors to absolute performance during the second quarter of 2021. The company specializes in string inverters that are predominantly used in distributed solar panel applications globally. The fast growing underlying market for solar panel installations, potential for market share gains and market share growth in ground-mounted solar power stations have helped drive the stock price higher.

On the other hand, Bank Tabungan Negara was among the biggest detractors to relative performance during the quarter. Bank Tabungan Negara is an Indonesian market leader in mortgage lending and the company specializes in middle- to low income-borrowers. There is a persistent shortage of housing in Indonesia and that demand, in conjunction with the under-penetration of mortgages, offers strong growth prospects for the company. We believe the bank could potentially see a sequential improvement in profits driven by reduced credit losses this year. But the Indonesian market in general, and its banking sector in particular, has been negatively affected by the latest wave of COVID infections. We remain positive on the mid- to long-term growth prospects of Bank Tabungan Negara, driven by strong underlying demand, a rebounding property market, supportive government policies in the sector and the potential for the bank to improve its operational efficiencies. The investment case is also supported by very attractive valuations.

Notable Portfolio Changes:

During the second quarter we participated in the IPO of Full Truck Alliance (“FTA”), a leading online commercial freight platform in China that is also the world’s largest digital freight platform. FTA acts as an online marketplace that connects truckers with firms that need goods shipped. From the truckers’ perspective, the platform provides a much faster, cheaper and more convenient way to find customers, while at the same time lift earnings potential by offering more pricing transparency, optimized delivery route planning and increased backhaul utilization—all of which increases earning potential and equally important improves the quality of life for millions of truckers in China. From the goods shippers’ perspective, the platform cuts out multiple layers of middlemen thereby meaningfully reducing both the time and cost of finding truckers. The platform also helps reduce emissions by cutting down empty miles and wasted fuel. In 2020, FTA helped reduce an estimated 330,000 tons of CO2 emissions.

Outlook:

Looking ahead, earnings growth, liquidity and valuations all appear broadly supportive of Asia’s equity markets. We expect strong corporate earnings across Asia in 2021 as the global recovery continues to expand despite sporadic COVID-19 outbreaks—especially in developing economies. Across the region we see sufficient liquidity—while we have not seen as much uptake in credit, any pick up in credit issuance, especially in South and South East Asia, should further support economic growth. We also see a return to normalcy, leading to better economic prospects for businesses. Many countries in Asia have progressed from recovery to expansion, while others like Indonesia are still getting back to pre-pandemic levels of activity.

For investors interested in ESG (Environmental, Social and Governance) themes, such as reducing carbon emissions, alleviating poverty and creating greater financial inclusion in the developing world, Asia remains an important investment destination, in our view. To tackle these themes globally, we believe we need to include the world’s most populous economies, many of which lie in Asia. As the global economy returns to strength, we seek attractive opportunities for alpha generation throughout our large, diverse investment universe.

 

As of June 30, 2021, the securities mentioned comprised the Matthews Asia ESG Fund in the following percentages: Ginlong Technologies Co., Ltd., 2.6%; PT Bank Tabungan Negara, 1.4%; and Full Truck Alliance Co., Ltd., 1.1%.

Current and future holdings are subject to change and risk. The Fund’s ESG strategy may select or exclude securities of certain issuers for reasons other than potential performance.

Earnings growth is not representative of the Fund’s future performance.

Average Annual Total Returns - MASGX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
62.50% 19.27% 17.32% N.A. 12.18% 04/30/2015

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.42%
Net Expense Ratio 1.38%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2022. Please see the Fund’s prospectus for additional details.

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.