TOP
Asia Fixed Income

Matthews Asia Credit Opportunities Fund MCRDX

Snapshot
  • Bottom-up Asia credit strategy, with a focus on risk-adjusted returns
  • Invest primarily in USD-denominated high yield Asian bonds
  • Flexibility to invest across the spectrum of credit quality and issuers’ capital structure

04/29/2016

Inception Date

-3.80%

YTD Return

(as of 07/30/2021)

$9.64

Price

(as of 07/30/2021)

$96.37 million

Fund Assets

(as of 06/30/2021)

Objective

Seeks total return over the long term.

Strategy

Under normal circumstances, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in debt and debt-related instruments issued by companies as well as governments, quasi-governmental entities, and supranational institutions in Asia. Debt and debt-related instruments typically include bonds, debentures, bills, securitized instruments (which are vehicles backed by pools of assets such as loans or other receivables), notes, certificates of deposit and other bank obligations, bank loans, senior secured bank debt, convertible debt securities, credit-linked notes, inflation-linked instruments, repurchase agreements, payment-in-kind securities and derivative instruments with fixed income characteristics.

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. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. 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.

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

Fund Facts
Inception Date 04/29/2016
Fund Assets $96.37 million (06/30/2021)
Currency USD
Ticker MCRDX
Cusip 577-130-677
Portfolio Turnover 48.5%
Benchmark J.P. Morgan Asia Credit 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 1.14%
Net Expense Ratio 1.14%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Credit Opportunities Fund
MCRDX
1.27% 0.61% -2.14% 4.57% 4.09% 4.06% n.a. 4.21% 04/29/2016
J.P. Morgan Asia Credit Index
0.44% 1.07% -0.12% 3.85% 6.39% 4.27% n.a. 4.55%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Credit Opportunities Fund
MCRDX
1.27% 0.61% -2.14% 4.57% 4.09% 4.06% n.a. 4.21% 04/29/2016
J.P. Morgan Asia Credit Index
0.44% 1.07% -0.12% 3.85% 6.39% 4.27% n.a. 4.55%
For the years ended December 31st
Name 2020 2019 2018 2017
Matthews Asia Credit Opportunities Fund
MCRDX
1.80% 13.34% -2.88% 7.86%
J.P. Morgan Asia Credit Index
6.33% 11.35% -0.77% 5.77%

Source: BNY Mellon Investment Servicing (US) Inc., Index data from J.P. Morgan. 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.

Yield

(as of 06/30/2021)
11.77% Yield to Worst
1.68% 30-Day SEC Yield
1.68% 30-Day SEC Yield (excluding expense waiver)

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 245 funds
  • 3 YEAR
  • out of 245 funds
  • 5 YEAR
  • out of 196 funds
  • 1 YEAR
  • 4th
  • 104 out of 119 funds
  • 3 YEAR
  • 3rd
  • 61 out of 109 funds
  • 5 YEAR
  • 3rd
  • 58 out of 102 funds
  • SINCE INCEPTION
  • 2nd
  • 50 out of 102 funds

Ratings agency calculation methodology

Portfolio Managers

Teresa  Kong, CFA photo
Teresa Kong, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Lead Manager

Portfolio Characteristics

(as of 06/30/2021)
2.7
Modified Duration
42
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Positions

(as of 06/30/2021)
Name Sector Currency % Net Assets
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 5.8
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 5.3
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 5.1
King Talent Management, Ltd., 5.600%, 06/04/2068 Financials U.S. Dollar 5.0
Honghua Group, Ltd., 6.375%, 08/01/2022 Energy U.S. Dollar 4.9
Tata Motors, Ltd., 5.875%, 05/20/2025 Consumer Discretionary U.S. Dollar 4.7
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 4.4
Indika Energy Capital III Pte, Ltd., 5.875%, 11/09/2024 Energy U.S. Dollar 4.2
Times China Holdings, Ltd., 6.200%, 03/22/2026 Real Estate U.S. Dollar 3.5
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.2
TOTAL 46.1

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
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 27.4
Financials 21.7
Energy 11.2
Consumer Discretionary 9.5
Health Care 7.6
Communication Services 7.2
Materials 6.2
Information Technology 1.6
Foreign Government Bonds 1.3
Industrials 0.8
Cash and Other Assets, Less Liabilities 5.5

"Foreign Government Bonds" category includes supranationals.
Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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

By issuer's country of risk Fund
China/Hong Kong 52.0
India 16.6
Indonesia 9.7
Vietnam 6.6
Thailand 2.9
Australia 2.2
Malaysia 2.0
South Korea 0.9
New Zealand 0.8
Philippines 0.8
Cash and Other Assets, Less Liabilities 5.5

Not all countries are included in the benchmark index. Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Supranational is an international organization in which member states transcend national boundaries, (ex. IMF).

Currency Fund Contribution To Duration
U.S. Dollar 100.0 2.7

Cash and other assets may include forward currency exchange contracts and certain derivative instruments that have been marked-to-market.

Quality Distribution Fund
BBB 2.2
BBB- 0.6
BB+ 6.5
BB 16.5
BB- 21.5
B+ 8.1
B 10.1
B- 1.5
CCC+ 1.8
Not Rated 25.6
Cash and Other Assets, Less Liabilities 5.5

Credit quality is provided for the underlying bond holdings of the Fund and does not include common equities, cash and other assets and percentage values will not total 100%. Credit quality rating symbols reflect that of S&P and generally credit ratings range from AAA (highest) to D (lowest). When ratings from Moody's, S&P and Fitch are available for a bond in the Fund, the middle rating of the three is used. When two ratings are available, the lowest rating is used. When only one rating is provided, that one is used. Foreign government bonds without a specific rating are assigned the country rating provided by one of the three agencies. Securities that are not rated by any one of the three agencies are reflected as such.
Sources: FactSet Research Systems, Moody's, S&P and Fitch

Asset Type Fund
Corporate Bonds 72.2
Convertible Bonds 15.6
Government Bonds 6.6
Cash and Other Assets, Less Liabilities 5.5

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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)
07/26/2021 07/27/2021 $0.03266 $0.00000 $0.00000 $0.03266 0.3% N.A.
06/28/2021 06/29/2021 $0.03356 $0.00000 $0.00000 $0.03356 0.3% N.A.
05/25/2021 05/26/2021 $0.02845 $0.00000 $0.00000 $0.02845 0.3% N.A.
04/26/2021 04/27/2021 $0.03737 $0.00000 $0.00000 $0.03737 0.4% N.A.
03/24/2021 03/25/2021 $0.03841 $0.00000 $0.00000 $0.03841 0.4% N.A.
02/22/2021 02/23/2021 $0.02591 $0.00000 $0.00000 $0.02591 0.3% N.A.
01/25/2021 01/26/2021 $0.04658 $0.00000 $0.00000 $0.04658 0.5% N.A.
12/15/2020 12/16/2020 $0.05833 $0.02672 $0.00000 $0.08505 0.8% N.A.
11/18/2020 11/19/2020 $0.04203 $0.00000 $0.00000 $0.04203 0.4% N.A.
10/26/2020 10/27/2020 $0.03420 $0.00000 $0.00000 $0.03420 0.3% N.A.
09/28/2020 09/29/2020 $0.03784 $0.00000 $0.00000 $0.03784 0.4% N.A.
08/27/2020 08/27/2020 $0.04322 $0.00000 $0.00000 $0.04322 0.4% N.A.
07/27/2020 07/28/2020 $0.03875 $0.00000 $0.00000 $0.03875 0.4% N.A.
06/24/2020 06/25/2020 $0.03634 $0.00000 $0.00000 $0.03634 0.4% N.A.
05/26/2020 05/27/2020 $0.04014 $0.00000 $0.00000 $0.04014 0.4% N.A.
04/27/2020 04/28/2020 $0.03833 $0.00000 $0.00000 $0.03833 0.4% N.A.
03/25/2020 03/26/2020 $0.03086 $0.00000 $0.00000 $0.03086 0.3% N.A.
02/26/2020 02/27/2020 $0.03930 $0.00000 $0.00000 $0.03930 0.4% 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 Credit Opportunities Fund returned -2.14 (Investor Class) and -2.06% (Institutional Class) while its benchmark, the J.P. Morgan Asia Credit Index, returned -0.12%. For the quarter ending June 30, the Fund returned 0.61% (Investor Class) and 0.65% (Institutional Class) compared to the benchmark return of 1.07% over the same period. 

Market Discussion:

After a dramatic first quarter of ups and downs, the second quarter felt like a period of normalization. The market was coming to terms with froth in the most expensive parts of the growth market, adjusting their valuations lower and simultaneously repricing new growth opportunities higher, including cyclicals, as the global economy recovers. These cyclical industries, such as semiconductors, commodities and basic materials, were boosted by increased coronavirus vaccination across the developed world and the rapid resumption of economic activity.

The good performance of asset classes was driven by the market coming to terms with the growth and value rotations in terms of valuation. Moreover, the market is understanding that the global economy is improving rather than deteriorating, and that the policy stance from global central banks and governments will continue to be supportive. These factors meant that it was generally a good second quarter for equities as well as bonds. The MSCI Emerging Markets Index returned 5.2% while the J.P. Morgan Asia Credit Index (JACI) returned 1.1% on the quarter.

Within China, concerns about certain highly levered Chinese developers led to market repricing of China property developer risk. This is most apparent in more highly levered property developers in China, which came under pressure in June and drove high yield credit spreads around 20 basis points (0.20%) wider in the quarter. 

Performance Contributors and Detractors:

For the first half of 2021, our holdings in the real estate sector, which consists mainly of Chinese real estate developers, and in the communications sector contributed to performance. On the other hand, detractors over the same period came largely from distress in two holdings within the Indonesian textile industry, PB International (Pan Brothers) and Sri Rjeki Isman Tbk PT. Both companies had trouble refinancing their bank loans as Indonesian banks grew more skeptical of the industry after the default of Duniatex, another textile manufacturer in Indonesia.

During the second quarter, real estate developers and basic industry were top contributors to relative performance. Positioning in the tech sector and lack of exposure to governments/quasi-sovereigns detracted from performance. The top contributors to performance came from convertible bonds, such as Kakao Corp., a South Korean social media and e-commerce platform and NIO Inc., a Chinese electronic vehicle maker. The top detractors came from exposure to Huarong Finance, a Chinese asset manager, and Sri Rejeki Isman Tbk PT, an Indonesian textile manufacturer. We initiated a position in Huarong after the bonds sold off on news of possible losses from non-core overseas investments and the delayed publication of annual results. We believe the bonds were oversold given we deem this to be one of China’s systematically important financial institutions. In our base case, Huarong may experience some combination of asset sales, government bailout and corporate restructuring such that bondholders will be made whole.

Notable Portfolio Changes:

During the second quarter, we added exposures to the Chinese real estate and internet sectors. Within real estate, we added CIFI Holdings, a high-quality developer we previously held. Within Chinese internet, we initiated positions in the convertible bonds of Meituan, a web-based shopping platform company, and Weimob, an e-commerce and marketing solutions company. We believe regulatory risks and competition within the internet space have put price pressure on these names; however, over the long term, we believe their businesses will scale to drive profitability. We also added Huarong Finance for the special situations opportunity as the company works through asset sales or a corporate restructuring.

We exited Indonesia textile manufacturer Sri Rejeki Isman Tbk PT in the quarter. Sri Rejeki Isman had shown reasonable operating results throughout the COVID-crisis. However, the company failed to refinance its bank loans earlier in the year and seemed to signal a lack of willingness, rather than ability, to treat debtholders fairly. As a result, we exited the position. We also exited Thailand’s state-owned commercial bank Krungthai Bank in the quarter as the economic recovery in Thailand seemed continually pushed out with new waves of COIVD resurgence.

Outlook:

Looking ahead, with new confirmed COVID cases subsiding in major economies such as U.S. and Europe, we believe the U.S. and global economies will be on better footing in the next 12 months. We will continue to monitor the effectiveness of vaccines against new variants of the coronavirus. Due to the difference in administrative organizational capabilities of different countries, we still expect to see greater dispersion going forward. The likelihood and timing of the Fed “tapering” continues to be a point of focus, though we do not expect the Fed to move rapidly into a hawkish taper.

Within this global context, China has always marched to the beat of its own drum. China was the first to control COVID, and thus required the least policy easing to support its economy. Having seen its economy rebounding, China policymakers are no longer in crisis-fighting mode and are looking more to normalize their policies compared to policymakers in the rest of the world. We see anti-trust, consumer protection and privacy legislations curbing the powers of big internet platforms. More industries could be implicated including the real estate sector, which has already seen financial leverage curbs and price controls since 2018, and the financial sector, as it grapples with possible bad debts stemming from the COVID-crisis and the previous shadow-banking excesses. Another key uncertainty is U.S. – China relations. Diplomatic tensions over various human rights issues, for instance, continue to ratchet up, with the risk of the U.S. government expanding prohibitions against U.S. commercial and financial dealings with Chinese companies and industries. While we are more cautious regarding China, we see changes in macro and industrial trends presenting opportunities for us as active investors.

As of June 30, 2021, the securities mentioned comprised the Matthews Asia Credit Opportunities Fund in the following percentages: PB International BV (Pan Brothers), 7.625%, 01/26/2022; Kakao Corp., Cnv., 0.000%, 04/28/2023, 1.8%; Kakao Corp., Cnv., 0.000%, 04/28/2023, 0.9%; NIO, Inc., Cnv., 0.500%, 02/01/2027, 1.1%; Huarong Finance 2017 Co., Ltd., 4.000%, 05/07/2068, 1.0%; Huarong Finance 2019 Co., Ltd., 4.250%, 03/30/2068, 1.0%; Huarong Finance 2017 Co., Ltd., 4.500%, 07/24/2068; Huarong Finance 2017 Co., Ltd., 4.500%, 07/24/2068, 0.5%; CIFI Holdings Group Co., Ltd., 4.800%, 05/17/2028, 2.4%; Meituan, Cnv., 0.000%, 04/27/2028; Weimob Investment, Ltd., Cnv., 0.000%, 06/07/2026, 0.8%.

The Fund held no positions inSri Rjeki Isman Tbk PT; PT Duniatex; and Krungthai Bank. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MCRDX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
4.57% 4.09% 4.06% N.A. 4.21% 04/29/2016

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 1.14%
Net Expense Ratio 1.14%

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.

Yields as of 06/30/2021
Yield to Worst 11.77%
30-Day SEC Yield 1.68%
30-Day SEC Yield (excluding expense waiver) 1.68%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2021, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Yield to worst is the lowest potential yield a bond can receive without actually defaulting – is for the underlying bond-only portion of the portfolio, and as of May 2020, is calculated by making worst-case scenario assumptions using the weighted averages of the underlying security-level yields, weighted according to each security’s market value. It does not represent or predict the yield on any fund. Source: FactSet Research Systems 

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. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. 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.

 

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.