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Asia Growth

Matthews India Fund MINDX

Snapshot
  • Unconstrained all-cap strategy focused on companies with a sustainable competitive edge and pricing power, which are able to perform throughout economic cycles
  • Fundamental bottom-up approach to seek well-run entrepreneurial companies with sustainable organic growth and trustworthy managements
  • Bias toward businesses that cater to rising domestic consumer demand and to policy-independent sectors

10/31/2005

Inception Date

16.39%

YTD Return

(as of 11/30/2021)

$30.60

Price

(as of 11/30/2021)

$807.92 million

Fund Assets

(as of 10/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews India Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. 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 10/31/2005
Fund Assets $807.92 million (10/31/2021)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 57.4%
Benchmark S&P Bombay Stock Exchange 100 Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 10/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
-0.35% 7.48% 20.81% 44.47% 15.46% 9.13% 10.67% 11.19% 10/31/2005
S&P Bombay Stock Exchange 100 Index
-0.64% 10.61% 25.20% 53.90% 19.92% 13.78% 9.63% 11.29%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
-0.53% 9.18% 21.22% 47.71% 13.23% 9.68% 11.09% 11.27% 10/31/2005
S&P Bombay Stock Exchange 100 Index
1.25% 12.23% 26.01% 57.47% 17.65% 14.05% 10.49% 11.40%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews India Fund
MINDX
16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90% 31.54% -36.48%
S&P Bombay Stock Exchange 100 Index
13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70% 28.62% -36.66%

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 09/30/2021)

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 20 funds
  • 3 YEAR
  • out of 20 funds
  • 5 YEAR
  • out of 18 funds
  • 10 YEAR
  • out of 14 funds
  • 1 YEAR
  • 4th
  • 19 out of 22 funds
  • 3 YEAR
  • 4th
  • 18 out of 20 funds
  • 5 YEAR
  • 4th
  • 17 out of 18 funds
  • 10 YEAR
  • 2nd
  • 7 out of 14 funds
  • SINCE INCEPTION
  • n.a.
  • 1 out of 2 funds

Ratings agency calculation methodology

Portfolio Managers

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Lead Manager

Sharat  Shroff, CFA photo
Sharat Shroff, CFA

Co-Manager

Portfolio Characteristics

(as of 09/30/2021)
Fund Benchmark
Number of Positions 57 101
Weighted Average Market Cap $58.4 billion $69.9 billion
Active Share 50.9 n.a.
P/E using FY1 estimates 31.2x 24.4x
P/E using FY2 estimates 25.0x 20.8x
Price/Cash Flow n.a. 16.5
Price/Book 4.6 3.7
Return On Equity 17.2 16.2
EPS Growth (3 Yr) 15.2% 11.1%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2021)
-3.26%
Alpha
0.98
Beta
79.19%
Upside Capture
91.62%
Downside Capture
0.48
Sharpe Ratio
-0.73
Information Ratio
6.04%
Tracking Error
94.38

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 10/31/2021)
Name Sector % Net Assets
Reliance Industries, Ltd. Energy 8.5
HDFC Bank, Ltd. Financials 6.9
Infosys, Ltd. Information Technology 6.2
ICICI Bank, Ltd. Financials 5.8
Bajaj Finance, Ltd. Financials 4.6
Shriram City Union Finance, Ltd. Financials 3.9
Kotak Mahindra Bank, Ltd. Financials 3.6
Tata Consultancy Services, Ltd. Information Technology 3.6
Avenue Supermarts, Ltd. Consumer Staples 3.5
Housing Development Finance Corp., Ltd. Financials 3.0
TOTAL 49.6

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 09/30/2021)
  • Sector Allocation
  • Market Cap Exposure

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

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 $0.17084 $0.62672 $0.79756 3.1% 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.

Commentary

Period ended September 30, 2021

For the quarter ending September 30, 2021, the Matthews India Fund returned 9.18% (Investor Class) and 9.26% (Institutional Class), while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned 12.23% over the same period.

Market Environment:

The positive performance of the Indian equity market continued during the third quarter, led by sustained high retail equity flows, as demonstrated by the near doubling of individual retail brokerage accounts over the last 12 months. Equity market performance over the last 18 months, coupled with extremely low interest rates for savings accounts, were the two primary drivers of higher retail participation in equity markets. To a lesser extent, the shift to work-from-home culture was also a contributor. In addition, the regulatory crackdown in China over the last few months has made global investors look at India more favorably within the context of regional equity exposure.

After a disastrous second COVID-19 wave, India’s economic improvement has been swift. Confidence in India’s ability to handle a potential third wave has been boosted given the rapid and extensive vaccination program that is underway. India is now vaccinating over 10 million people on a daily basis. Increasing rates of vaccination are reducing the underlying fear and improving the probability of economic normalization in months to come. This has had a positive impact in particular on the financials sector, where investors are beginning to be more optimistic about normalization of credit quality and credit growth in quarters to come.

Performance Contributors and Detractors:

On a sector basis, our allocation to health care was the biggest detractor during the quarter. The health care sector in general went out of favor due to concerns of generic drug pricing pressure in the U.S. While the portfolio has very little exposure to manufacturers involved in marketing generic formulations in the U.S., given the negative sentiment in the sector as a whole, our holdings in Laurus Labs and Neuland Labs were both down. With increased active pharmaceutical ingredient (API) outsourcing to India, we continue to believe these holdings have the potential to achieve good growth in coming quarters, and we expect both of them to sustain or have multiple re-ratings from current levels.

On the other hand, our stock selection within the information technology (IT) sector contributed to relative performance. Mindtree and Larsen & Toubro Infotech (LTI) were the biggest positive contributors in the sector. India-based IT services firms are seeing strong demand on the back of greater outsourcing of digital services by corporates globally. Investors seem to expect the current growth trend to continue for the coming two to three years, which has driven a substantial valuation expansion in this sector, including Mindtree and LTI.

Notable Portfolio Changes:

We made a few changes during the third quarter, including exiting Alembic Pharmaceuticals. Alembic Pharma had done well on the back of favorable tailwinds in their U.S. generic formulations business, supported by favorable supply and demand dynamics. But we think the pricing environment will be unfavorable in coming quarters, which may have a negative impact on Alembic’s volume growth and bottom line. Consequently, we decided to exit our holding in the stock.

In terms of additions to the portfolio, we have been busy evaluating many initial public offerings (IPOs) over the past few months. E-commerce has seen skyrocketing growth and we participated in the IPO of e-commerce platforms, Zomato and Cartrade Tech. Zomato is an online restaurant discovery and food delivery business, with one of the largest market shares in the country.  We believe Zomato can sustain its solid growth in subsequent years as Indians order more frequently or eat out more. Cartrade is an online discovery and research platform for users to post, search, sell and purchase cars. Given Cartrade’s high website traffic, we think auto original equipment manufacturers (OEMs) would spend more in coming years on online advertising which would be beneficial for the company. We also see room for growth in Cartrade’s used car auction platform which is a very profitable business but has seemed underappreciated by the market.

Outlook:

While we remain optimistic about the macroeconomic environment in India, we are also closely watching certain headwinds that can have a negative impact on equity markets in particular. We continue to believe that India is coming out of a cyclical slowdown which started in 2018. Low real interest rates within India are fueling a revival of the real estate sector which has been in doldrums for the last five or six years. We believe this trend, coupled with the government’s focus on infrastructure creation, will be a major driver of economic improvement in general, and the construction industry in particular, in coming quarters. The government’s emphasis on manufacturing, coupled with a global push for alternate suppliers outside of China, is also leading to greater private capital expenditures in manufacturing. Additionally, expansion projects announced by core industries like steel and cement will likely lead to job growth, and as a consequence, a faster pace of economic growth compared to prior years. Aside from this, we are also seeing widespread hiring activity in sectors like banking, IT services, and health care, among others, which traditionally have been providers of white collar jobs, but over the past few years have lagged. This is another positive trend from the perspective of supporting sustained growth in consumption in the years to come.

In terms of risk, we continue to remain wary of inflation and its potential to surprise on the upside. With oil prices pushing US$80 per barrel at the end of the quarter, we believe inflationary pressure is going to become more pressing in the months to come. At present, demand continues to be robust but persistent inflation runs the risk of eventual demand destruction. Within the backdrop of inflationary pressure, India’s central bank has been accommodative so far, but it is not clear how long that will last. If the U.S. Fed begins to raise its benchmark interest rate, it seems inevitable that policy tightening would also start in India. In this context, valuations are far above long-term averages and any monetary policy tightening could create a sharp negative correction in the equity markets globally, India included.

As of September 30, 2021, the securities mentioned comprised the Matthews India Fund in the following percentages: Laurus Labs, 2.0%; Neuland Laboratories, 1.0%; Mindtree, 1.5%; Larsen & Toubro Infotech, 2.0%; Zomato, 0.4%; and Cartrade Tech, 0.3%. The Fund held no positions in Alembic Pharmaceuticals.

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

 

Average Annual Total Returns - MINDX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
47.71% 13.23% 9.68% 11.09% 11.27% 10/31/2005

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 1.15%

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.

 

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.