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Asia Growth

Matthews Asia Innovators Fund MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

-4.46%

YTD Return

(as of 09/17/2021)

$25.51

Price

(as of 09/17/2021)

$1.88 billion

Fund Assets

(as of 08/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators 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 located in Asia that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

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

Fund Facts
Inception Date 12/27/1999
Fund Assets $1.88 billion (08/31/2021)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 119.8%
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 1.10%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
3.56% -4.46% -2.96% 24.36% 27.09% 21.63% 15.57% 6.68% 12/27/1999
MSCI All Country Asia ex Japan Index
2.32% -5.38% 0.87% 17.92% 10.55% 11.75% 7.73% 7.08%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
3.39% 5.77% 5.02% 54.39% 26.84% 24.73% 15.42% 7.13% 12/27/1999
MSCI All Country Asia ex Japan Index
-0.09% 3.66% 6.51% 40.03% 12.54% 14.82% 7.34% 7.41%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Asia Innovators Fund
MATFX
86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11% -17.26%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70% -17.07%

MSCI AC Asia Ex Japan Index since inception value calculated from 12/31/99.

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
  • 10 YEAR
  • out of 27 funds
  • 1 YEAR
  • 1st
  • 8 out of 36 funds
  • 3 YEAR
  • 1st
  • 2 out of 35 funds
  • 5 YEAR
  • 1st
  • 6 out of 30 funds
  • 10 YEAR
  • 1st
  • 1 out of 21 funds
  • SINCE INCEPTION
  • 3rd
  • 7 out of 11 funds

Ratings agency calculation methodology

Portfolio Manager

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Lead Manager

Portfolio Characteristics

(as of 06/30/2021)
Fund Benchmark
Number of Positions 40 1,204
Weighted Average Market Cap $146.4 billion $183.0 billion
Active Share 77.2 n.a.
P/E using FY1 estimates 27.8x 15.1x
P/E using FY2 estimates 23.1x 13.8x
Price/Cash Flow 20.0 10.3
Price/Book 2.6 2.1
Return On Equity 2.2 13.0
EPS Growth (3 Yr) 26.9% 15.5%

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

Top 10 Holdings

(as of 08/31/2021)
Name Sector Country % Net Assets
Sea, Ltd. Communication Services Singapore 6.6
Meituan Consumer Discretionary China/Hong Kong 5.6
Bilibili, Inc. Communication Services China/Hong Kong 5.1
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.0
JD.com, Inc. Consumer Discretionary China/Hong Kong 4.8
Silergy Corp. Information Technology China/Hong Kong 4.5
ICICI Bank, Ltd. Financials India 4.3
Bajaj Finance, Ltd. Financials India 4.0
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 3.7
HDFC Bank, Ltd. Financials India 3.4
TOTAL 47.0

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 $0.00000 $0.13545 $0.31069 $0.44614 1.8% 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 Innovators Fund returned 5.02% (Investor Class) and 5.09% (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 5.77% (Investor Class) and 5.80% (Institutional Class), while the benchmark returned 3.66%.

Market Environment:

The first six months of the year has been a volatile period for Asian equity markets. There have been two driving forces going head-to-head during the first half of the year—the ongoing recovery of the economy with improving corporate earnings versus increasing regulatory headwinds. During the first quarter of the year, the market sold off on the back of increasing regulatory challenges, especially within the Chinese internet and education sectors. During the same period equity markets rotated from growth to value.

During the second quarter, growing concerns over inflation and potential interest rate hikes began to fade. As companies reported earnings, the market started to recover as investors shifted their attention back to fundamentals. We might see these two forces continue to pull the market in either direction during the next few quarters. Toward the end of the second quarter, concerns over the rise of the Delta variant of the COVID virus spooked investors again, causing equities to give up some of the gains made during the quarter.

Performance Contributors and Detractors:

For the first six month of the year Chinese video content company Bilibili, Inc. and Singapore-based gaming and e-commerce company Sea Ltd. were the largest contributors to the Fund’s absolute and relative performance. Sea’s dual engines of growth—online gaming and e-commerce—continued to show healthy growth, contributing to its strong performance during the period. Bilibili, which caters to young viewers, continued to demonstrate its strong hold on China’s “Generation-Z” cohort (approximate birth years: mid-1990s to early 2010s). Both companies remain as core holdings in the strategy.

During the second quarter, the health care sector in China made the biggest contribution to relative performance, as concerns over rate hikes and inflation subsided. Among individual health care companies, Wuxi Biologics  Inc., a CDMOs (Contract Development and Manufacturing Organization) that helps many of large global and smaller regional pharma companies get drugs developed, made the biggest contribution, and was the biggest contributor to absolute performance during the quarter. Chinese information technology company Silergy Corp. was another holding that performed well during the quarter. Silergy, which mainly makes power management analog semiconductors, is in our view well positioned to benefit from the import-substitution trend we have been seeing in China, as the company continued to take market share away from other global semiconductor companies. We expect this trend to continue in coming years.

On the other hand, Chinese e-commerce companies continued to lag in the portfolio. Both Alibaba Group Holding Ltd. and JD.com, Inc. were among the top detractors to absolute performance both during the second quarter and year to date periods. The Chinese internet sector overall remained under pressure from increasing regulatory headwinds, as the Chinese government continued their investigation focusing mainly on consumer privacy and data protection. The sector will continue to be under pressure as the current investigation is on-going. However, we expect the market to reflect each company’s fundamentals when the investigation is complete. The underlying growth and earnings of Chinese internet companies have been very resilient so far and valuations are now looking very attractive. We continue to be very selective in this sector and will continue to focus on fundamentals.

Notable Portfolio Changes:

We continue to reduce our exposure to areas that are highly sensitive to the current regulatory environment. During the quarter, we exited our position in China’s Tal Education Group, which offers after-school education for students in primary and secondary school. Tal Education faces uncertainty that may directly impact their revenue in the face of a potential government crackdown on for-profit education. We will continue to monitor this space until the regulatory framework becomes more transparent. During the quarter, we added Maruti Suzuki India Ltd., a subsidiary of the Japanese automotive manufacturer Suzuki Maruti Suzuki has been introducing energy efficient models in India while also developing hybrid models. We believe that Maruti Suzuki can make a big shift to hybrids and then to electric vehicles in coming years.

Outlook:

Looking ahead, while there is some risk of the Delta variant threatening economic recovery in some countries, the COVID vaccination programs across Asia are also picking up pace. Regulatory environment concerns will likely persist during the second half of the year, and we will continue to monitor this situation very closely.

With the on-going concerns over the regulatory environment in China, valuations for innovative companies continue to look attractive in our view. We are also excited to see the pace of innovation picking up across Asia, and we are seeing more “unicorns” going public beyond China, particularly in South Korea, India and Indonesia. We find many innovative companies in Asia at appealing levels today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital. We continue to see many structural growth opportunities driven by rising disposable incomes and growing demand for improving productivity.

 

As of June 30, 2021, the securities mentioned comprised the Matthews Asia Innovators Fund in the following percentages: Bilibili, Inc. ADR, 6.1%; Sea, Ltd. ADR, 6.3%; Wuxi Biologics Cayman, Inc., 5.0%; Silergy Corp., 3.4%; Alibaba Group Holding, Ltd., 3.0%; JD.com, Inc., 4.2%; and Maruti Suzuki India, Ltd., 1.2%. The Fund held no positions in TAL Education Group ADR.

Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
54.39% 26.84% 24.73% 15.42% 7.13% 12/27/1999

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 1.10%

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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

 

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.