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Matthews China Fund MCHFX

Snapshot
  • High-conviction equity portfolio seeks companies benefiting from China’s domestic consumption
  • All-cap fundamental GARP approach driven by on-the-ground, proprietary research
  • Combines long-term core holdings with more opportunistic ideas to provide consistency through cycles

02/19/1998

Inception Date

6.67%

YTD Return

(as of 01/15/2021)

$28.80

Price

(as of 01/15/2021)

$1.51 billion

Fund Assets

(as of 12/31/2020)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews China 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 China. 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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 02/19/1998
Fund Assets $1.51 billion (12/31/2020)
Currency USD
Ticker MCHFX
Cusip 577-130-701
Portfolio Turnover 68.93%
Benchmark MSCI China Index MSCI China All Shares Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.09%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund
MCHFX
5.40% 12.69% 43.05% 43.05% 14.79% 17.98% 8.05% 11.20% 02/19/1998
MSCI China Index
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 5.78%
MSCI China All Shares Index
4.16% 13.38% 33.61% 33.61% 9.51% 11.38% n.a. n.a.
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund
MCHFX
5.40% 12.69% 43.05% 43.05% 14.79% 17.98% 8.05% 11.20% 02/19/1998
MSCI China Index
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 5.78%
MSCI China All Shares Index
4.16% 13.38% 33.61% 33.61% 9.51% 11.38% n.a. n.a.
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews China Fund
MCHFX
43.05% 34.56% -21.42% 59.37% -5.18% 2.41% -4.42% 6.84% 11.96% -18.93%
MSCI China Index
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10% -18.24%
MSCI China All Shares Index
33.61% 27.87% -23.15% 41.43% -7.69% -2.88% 23.64% 1.39% 19.53% -17.76%

MSCI China Index since inception value calculated from 2/28/98.

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 12/31/2020)

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 79 funds
  • 3 YEAR
  • out of 79 funds
  • 5 YEAR
  • out of 70 funds
  • 10 YEAR
  • out of 50 funds
  • 1 YEAR
  • 2nd
  • 40 out of 94 funds
  • 3 YEAR
  • 2nd
  • 28 out of 73 funds
  • 5 YEAR
  • 2nd
  • 18 out of 63 funds
  • 10 YEAR
  • 2nd
  • 21 out of 43 funds
  • SINCE INCEPTION
  • 2nd
  • 4 out of 14 funds

Ratings agency calculation methodology

Portfolio Managers

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

Portfolio Characteristics

(as of 12/31/2020)
20.2x
P/E using FY1 estimates
17.8x
P/E using FY2 estimates
$192.7 billion
Weighted Average Market Cap

Source: FactSet Research Systems

54
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Holdings

(as of 12/31/2020)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 10.5
Alibaba Group Holding, Ltd. Consumer Discretionary 9.3
JD.com, Inc. Consumer Discretionary 5.8
China Merchants Bank Co., Ltd. Financials 4.4
Bilibili, Inc. Communication Services 3.3
AIA Group, Ltd. Financials 3.1
Meituan Consumer Discretionary 2.9
China International Capital Corp., Ltd. Financials 2.7
Midea Group Co., Ltd. Consumer Discretionary 2.5
New Oriental Education & Technology Group, Inc. Consumer Discretionary 2.5
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 12/31/2020)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 25.8 35.2 -9.4
Financials 19.1 13.5 5.6
Communication Services 13.8 20.1 -6.3
Information Technology 12.5 6.7 5.8
Health Care 8.6 6.5 2.1
Industrials 6.2 4.5 1.7
Real Estate 4.6 3.6 1.0
Materials 4.2 2.1 2.1
Consumer Staples 3.5 4.5 -1.0
Utilities 1.0 1.8 -0.8
Energy 0.0 1.6 -1.6
Cash and Other Assets, Less Liabilities 0.6 0.0 0.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 66.1 73.9 -7.8
Large Cap ($10B-$25B) 16.1 16.0 0.1
Mid Cap ($3B-$10B) 14.9 9.2 5.7
Small Cap (under $3B) 2.3 1.0 1.3
Cash and Other Assets, Less Liabilities 0.6 0.0 0.6
China Exposure Portfolio Weight
SAR (Hong Kong) 44.0
A Shares 37.5
Overseas Listed Companies (OL) 8.8
H Shares 8.4
China-affiliated corporations (CAC) 0.8
Cash and Other Assets, Less Liabilities 0.6

Definitions: SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. China A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

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 $0.06025 $0.17213 $0.10568 $0.33806 1.3% N.A.
12/16/2019 12/17/2019 $0.21449 $0.00000 $0.00000 $0.21449 1.1% 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.

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For the quarter ending Sept. 30, 2020, the Matthews China Fund returned 13.04% (Investor Class) and 13.05% (Institutional Class), while its primary benchmark, the MSCI China Index, returned 12.57%. The Fund’s secondary benchmark, the MSCI China All Shares Index, returned 13.19%.

Market Environment:

Chinese monthly economic data continues to show signs of recovery as reflected in the latest manufacturing and service PMI data as well business recovery statistics. Even the slow-to-recover consumer-oriented sectors are starting to show improvement including restaurant sales, cinema box office receipts and domestic travel. Domestic recovery is occurring alongside a stabilizing export sector and improving labor market, both of which should support better earnings prospects going forward.

COVID-19 remains a risk for economies globally, including China. While small pockets of coronavirus infections still occasionally emerge, China remains successful at flattening its curve of COVID-19 infections. Vigilant about testing, quarantining known cases and contact tracing, China has had the most success among large economies in our view in combatting the virus.
Chinese equities posted solid returns in the quarter, despite negative headlines about U.S. – China relations. Political tactics have so far focused on individuals and companies, as opposed to broad economic sanctions and negative policy. To date, the actions have been more disruptive to sentiment than economically damaging to either side. Looking at the U.S. side, it is difficult to decipher which portions of the negative rhetoric have true congressional support versus what is politically motivated by the election cycle.

Performance Contributors and Detractors:

From a sector perspective, stock selection in the financials, communications services and industrials was a contributor to relative performance. On the other hand, stock selection in health care, real estate and consumer discretionary sectors was a detractor.

A contributor among individual stocks was e-commerce company JD.com, which experienced increased demand for its services during the pandemic. As the second largest e-commerce company in China, JD.com has a broad reach and its profitability is improving. Logistics-oriented businesses tend to be very capital intensive in their early years, but with much of JD.com’s logistic infrastructure already in place, we expect that the business may be less capital intensive going forward. China has many metropolitan densities and the complexity of making deliveries to most households is high, creating a competitive moat for an e-commerce player such as JD.com.

A detractor among individual stocks was property developer Times China, which focuses on developments in the Greater Bay Area in Guangdong province. This area has been earmarked for further development in high-value-adding sectors such as the technology and financial industries, and is likely to see growth in infrastructure connectivity over time. Times China has an ample land bank in this region, allowing it to continue to grow its footprint. The real estate industry has been sluggish as the pandemic has disrupted sales in China, but we continue to like the company’s long-term prospects in land banking, as well as its attractive valuations.

Notable Portfolio Changes:

In the third quarter, we added a number of new positions, including four domestically listed A-share companies. New A-share positions include two health care companies, an information technology company and an industrials company. Other new positions include a fast-growing communication services platform and two Hong Kong-listed health care companies. New positions highlight our emphasis on growing domestic consumption in China. The IMF forecasts that China will be the only large economy to generate positive growth in 2020 and domestic consumption will play an important role in maintaining China’s economic engine. As we rotated capital within the portfolio during the quarter, we were particularly interested in opportunities among China’s knowledge-based sectors, where intellectual property and research and development can help companies build competitive moats.

Outlook:

Chinese manufacturing data points to a continued v-shaped recovery and a bright spot within the data suggests that small, private businesses are beginning to participate within the rebound. Fiscal stimulus in China has been incremental in scope and highly targeted, a trend we expect may continue. Interest rates in China have moved higher, reflecting China’s economic resilience amid the pandemic. Looking ahead, we expect to see continued recovery in China’s economic activity. While China is not immune from a global slowdown, it may be better positioned than other large economies to maintain its long-term growth.

Schools have reopened in Wuhan, the first city to be hit by the pandemic earlier in the year. China’s effective health care response has played an important role in reopening school, businesses and government offices across China. Keeping the coronavirus under control is key to maintaining China’s economic recovery, and we continue to see reasons for optimism on the public health front. Positive sentiment among domestic Chinese consumers is spurring increased economic activity. U.S. – China political tensions could heat up heading into the U.S. election, but escalating rhetoric may have little impact on either economy.

As of 09/30/2020, the securities mentioned comprised the Matthews China Fund in the following percentages: JD.com ADR, 3.1%; JD.com A-shares, 3.1%; Times China Holdings, Ltd., 1.2%. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MCHFX as of 12/31/2020
1YR 3YR 5YR 10YR Since Inception Inception Date
43.05% 14.79% 17.98% 8.05% 11.20% 02/19/1998

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 1.09%
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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.