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Asia Growth

Matthews Korea Fund MAKOX

Snapshot
  • Unconstrained all cap strategy focused on secular growth opportunities in Korea
  • Fundamental bottom-up approach seeks companies with sustainable business models, strong governance and improving competitive advantages against global peers
  • Highly-differentiated portfolio offers exposure to new economy growth drivers overlooked by index

01/03/1995

Inception Date

-14.39%

YTD Return

(as of 05/20/2022)

$4.88

Price

(as of 05/20/2022)

$113.40 million

Fund Assets

(as of 04/30/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Korea 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 South Korea. 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.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 01/03/1995
Fund Assets $113.40 million (04/30/2022)
Currency USD
Ticker MAKOX
Cusip 577-130-305
Portfolio Turnover 40.2%
Benchmark Korea Composite Stock Price Index
Geographic Focus South Korea
Fees & Expenses
Gross Expense Ratio 1.13%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 04/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Korea Fund
MAKOX
-6.10% -7.85% -13.51% -20.42% 7.84% 3.78% 6.60% 5.87% 01/03/1995
Korea Composite Stock Price Index
-5.94% -2.69% -14.41% -22.80% 6.31% 4.07% 3.80% 3.48%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Korea Fund
MAKOX
-0.76% -7.90% -7.90% -12.21% 9.81% 5.20% 7.16% 6.13% 01/03/1995
Korea Composite Stock Price Index
1.22% -9.13% -9.13% -14.88% 8.65% 5.40% 4.27% 3.72%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Korea Fund
MAKOX
-0.33% 40.77% 3.80% -22.21% 43.70% -6.32% 15.16% -0.73% 10.11% 24.05%
Korea Composite Stock Price Index
-4.79% 39.76% 4.46% -20.07% 37.71% 0.98% -4.61% -8.30% 2.90% 18.54%

KOSPI performance data may be readjusted periodically by the Korea Exchange due to certain factors, including the declaration of dividends.

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.

Due to current market volatility associated with the COVID-19 pandemic, funds may experience significant negative short-term performance.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 03/31/2022)

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

  • 1 YEAR
  • 1st
  • 6 out of 33 funds
  • 3 YEAR
  • 1st
  • 4 out of 33 funds
  • 5 YEAR
  • 4th
  • 23 out of 28 funds
  • 10 YEAR
  • 1st
  • 3 out of 19 funds
  • SINCE INCEPTION
  • 2nd
  • 3 out of 6 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Elli  Lee photo
Elli Lee

Lead Manager

Sojung  Park photo
Sojung Park

Co-Manager

Portfolio Characteristics

(as of 03/31/2022)
Fund Benchmark
Number of Positions 31 815
Weighted Average Market Cap $109.0 billion $93.8 billion
Active Share 72.4 n.a.
P/E using FY1 estimates 8.7x n.a.
P/E using FY2 estimates 7.7x n.a.
Price/Cash Flow 4.4 4.5
Price/Book 1.1 1.1
Return On Equity 13.2 11.6
EPS Growth (3 Yr) 14.3% 19.1%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
2.08%
Alpha
0.84
Beta
86.04%
Upside Capture
86.97%
Downside Capture
0.44
Sharpe Ratio
0.17
Information Ratio
6.64%
Tracking Error
93.12

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 04/30/2022)
Name Sector % Net Assets
Samsung Electronics Co., Ltd., Pfd. Information Technology 16.0
Samsung Electronics Co., Ltd. Information Technology 6.3
SK Hynix, Inc. Information Technology 5.0
Kia Corp. Consumer Discretionary 4.4
Shinhan Financial Group Co., Ltd. Financials 4.2
KB Financial Group, Inc. Financials 4.0
Hyundai Motor Co., Ltd., Pfd. Consumer Discretionary 3.7
Yuhan Corp. Health Care 3.4
Hana Financial Group, Inc. Financials 3.0
SK Innovation Co., Ltd. Energy 2.9
TOTAL 52.9

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 03/31/2022)
  • 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)
12/14/2021 12/15/2021 $0.09958 $0.19449 $0.10513 $0.39920 6.6% 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 March 31, 2022

For the quarter ending March 31, 2022, the Matthews Korea Fund returned -7.90% (Investor Class) and –7.83% (Institutional Class), while its benchmark, the Korea Composite Stock Price Index (KOSPI), returned -9.13% over the same period.

Market Environment:

2022 got off to a rocky start in Asian markets, led by Chinese equities. The confluence of a spike in COVID-19 cases and resulting policy of enforced lockdowns in tier one cities, ADR delisting pricing pressures, and investor worries that Russia-like sanctions could be implemented upon select Chinese companies dragged down markets across the region.

South Korean equities were also weak, though there were signs of stabilization during March. A very close Presidential election took place whereby Yoon Suk-Yeal, the main conservative party candidate, was elected President. Overall, the market reacted positively as the President-elect is known to support more lenient regulatory policies and most market participants expect a continuation of the macro policy. South Korea’s supply side bottlenecks are gradually easing, and manufacturing seems to be back to expansion territory.

Performance Contributors and Detractors:

The Fund’s allocation and stock selection within industrials and financial sectors contributed the most to relative performance for the quarter. Among individual stocks, LG Energy Solution, a storage battery manufacturing company and spin-off of LG Chemical, was the largest contributor to performance. We participated in LG Energy’s very successful IPO in January and anticipate the majority of proceeds will aid in expanding production capacity to keep pace with rising demand for electric vehicles. Hana Materials, a manufacturer and supplier of silicon materials for semiconductor equipment providers was among the top contributors. Hana Materials quickly gained market share over the course of the year by enhancing customer service, innovating their product line and meeting the demand for localization while diversifying its customer base and revenue streams.

On the other hand, the Fund’s allocation and stock selection within information technology and consumer staples sectors detracted the most from performance. Samsung Electronics and Sk Hynix detracted from absolute performance. Investors’ concern about potential deterioration in global demand into 2022 which will have negative impact on memory demand and price. We believe the sector is trading at attractive valuation reflecting such concerns.

Notable Portfolio Changes:

During the quarter, we initiated a position in Shinsegae Inc, the largest department store and luxury goods retailer in South Korea. As global economies continue to recover, Shinsegae’s market share has continued to expand in Korea. Shinsegae also has a duty-free division that we anticipate may be well positioned to benefit from the global re-opening and increased tourism.

We exited our position in Krafton Inc., a video game developer and distributor. Shares in Krafton tumbled due to a new game launch that didn’t meet market expectations and expensive valuation, so we took the opportunity to take profits from this solid performer.

Outlook:

South Korea has yet to see a boom in consumption, but looking ahead, we anticipate it will gradually improve during the coming year. Higher vaccination rates and the President-elect’s preference for growth of the private sector, and support for structural reform, deregulation and green industries potentially bodes well.

We remain focused on active security selection, concentrating on groundbreaking companies we believe are positioned to benefit from strong cash flows and the global recovery. We continue to look for companies that can benefit from domestic consumption, as well as South Korean companies effectively competing and innovating in global markets. We are confident the pioneering companies we’ve invested in will continue to show improved cash flows and long-term growth potential.

 

View the Fund’s top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MAKOX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-12.21% 9.81% 5.20% 7.16% 6.13% 01/03/1995

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 1.13%

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.