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Growth & Income

Matthews China Dividend Fund MCDFX

Snapshot
  • Total return strategy seeks to access the growth of China with lower volatility
  • Unconstrained all-cap portfolio with a quality bias
  • Flexible approach offers participation in both growth and value markets

11/30/2009

Inception Date

-14.89%

YTD Return

(as of 06/24/2022)

$15.09

Price

(as of 06/24/2022)

$252.63 million

Fund Assets

(as of 05/31/2022)

Objective

Total return with an emphasis on providing current income.

Strategy

Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

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

Fund Facts
Inception Date 11/30/2009
Fund Assets $252.63 million (05/31/2022)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 68.3%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
0.99% -11.28% -19.29% -26.39% 1.87% 4.67% 8.52% 7.84% 11/30/2009
MSCI China Index
1.19% -10.70% -16.71% -35.86% 0.01% 1.46% 5.24% 3.09%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-8.18% -16.47% -16.47% -17.72% 0.70% 6.33% 8.10% 8.26% 11/30/2009
MSCI China Index
-8.00% -14.19% -14.19% -32.47% -2.88% 3.67% 4.76% 3.38%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews China Dividend Fund
MCDFX
-0.49% 24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93% 13.35% 27.81%
MSCI China Index
-21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10%

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 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.

Yield

(as of 03/31/2022)
1.47% 30-Day SEC Yield
1.47% 30-Day SEC Yield (excluding expense waiver)
2.79% Dividend Yield

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

Ratings

  • OVERALL
  • out of 95 funds
  • 3 YEAR
  • out of 95 funds
  • 5 YEAR
  • out of 73 funds
  • 10 YEAR
  • out of 53 funds
  • 1 YEAR
  • 2nd
  • 28 out of 107 funds
  • 3 YEAR
  • 3rd
  • 46 out of 83 funds
  • 5 YEAR
  • 2nd
  • 33 out of 65 funds
  • 10 YEAR
  • 1st
  • 10 out of 46 funds
  • SINCE INCEPTION
  • 1st
  • 2 out of 39 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Yu  Zhang, CFA photo
Yu Zhang, CFA

Co-Manager

S. Joyce Li, CFA photo
S. Joyce Li, CFA

Co-Manager

Portfolio Characteristics

(as of 03/31/2022)
Fund Benchmark
Number of Positions 39 742
Weighted Average Market Cap $66.3 billion $136.5 billion
Active Share 87.5 n.a.
P/E using FY1 estimates 10.6x 9.9x
P/E using FY2 estimates 9.0x 8.9x
Price/Cash Flow 7.3 6.9
Price/Book 1.3 1.4
Return On Equity 17.3 13.4
EPS Growth (3 Yr) 16.8% 14.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
2.73%
Alpha
0.73
Beta
86.71%
Upside Capture
82.61%
Downside Capture
0.00
Sharpe Ratio
0.33
Information Ratio
10.94%
Tracking Error
70.23

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2022)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 10.2
CITIC Telecom International Holdings, Ltd. Communication Services 4.7
Postal Savings Bank of China Co., Ltd. Financials 4.6
BOC Hong Kong Holdings, Ltd. Financials 3.6
China Suntien Green Energy Corp., Ltd. Energy 3.2
Yangzijiang Shipbuilding Holdings, Ltd. Industrials 3.2
CSPC Pharmaceutical Group, Ltd. Health Care 3.2
China Everbright International, Ltd. Industrials 3.1
CK Hutchison Holdings, Ltd. Industrials 2.9
Huaxin Cement Co., Ltd. Materials 2.8
TOTAL 41.5

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
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure

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

Asset Type Fund
Common Equities and ADRs 95.9
Cash and Other Assets, Less Liabilities 4.1
China Exposure Portfolio Weight
SAR (Hong Kong) 35.1
H Shares 21.3
A Shares 11.7
China-affiliated corporations (CAC) 10.9
Overseas Listed Companies (OL) 7.9
B Shares 5.2
Unassigned 3.9
Cash and Other Assets, Less Liabilities 4.1

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)
12/14/2021 12/15/2021 $0.10775 $0.11879 $1.23175 $1.45829 7.6% N.A.
06/28/2021 06/29/2021 $0.37761 $0.00000 $0.00000 $0.37761 1.7% 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 China Dividend Fund returned -16.47% (Investor Class) and -16.42% (Institutional Class), while its benchmark, the MSCI China Index, returned -14.19%.

Market Environment:

Chinese equities fell sharply during the first quarter of 2022, as multiple negative impacts created significant market headwinds. The first shock was the Russian invasion of Ukraine, and the severe economic sanctions imposed on Russia by the West which caused the halting of trading of Russian equities. Many emerging markets funds with Russian equities exposure were forced to raise liquidity to cover the resulting losses and redemptions. Since Chinese equities are the most liquid assets in the emerging markets, they suffered a heavy sell off. Additionally, as Russia and China had recently jointly announced that their mutual cooperation “has no limit,” market participants worried that China’s supportive position toward Russia may result in damaging “secondary sanctions” from the West, dampening global investors’ sentiment towards Chinese equities.

The second shock was China’s continued implementation of its zero-COVID policy. As COVID cases started to increase in Jilin Province and Shanghai, government officials resorted to locking down the entire city. Locking down Shanghai—a business and financial hub of China—results in not only the loss of economic activity within the city itself but also impacts the production and logistic chain in other parts of China as well, making it look increasingly unlikely that China will be able to achieve the GDP growth target it set earlier this year. An additional shock this quarter stems from an increasingly hawkish U.S. Federal Reserve. Responding to sustained inflation pressures, the Fed has increased the number and magnitude of its forecast rate increases. This has resulted in a stronger U.S. dollar and soaring interest rates during the quarter, a combination that is typically negative for emerging markets equities.

Performance Contributors and Detractors:

On a sector basis, our stock selection within the consumer discretionary and energy sectors were the largest detractors from relative Fund performance. Our stock selection within the information technology and health care sectors were the largest contributors to relative performance.

Turning to individual holdings, E Ink, a global leader of ePaper technology firm based in Taiwan, was the top performance contributor to absolute performance during the quarter. The company continued to forecast strong revenue potential, lifting sentiment for the stock. Postal Savings Bank of China was the second largest performance contributor for the quarter, as the bank reported robust earnings growth for 2021, making it one of the fastest earnings growers among large Chinese banks. Additionally, the bank’s operating costs may soon decline, as it seeks to renegotiate the agency fee it is paying to its parent company, China Postal Group.

On the other hand, leading internet platform company Tencent was the largest relative performance detractor for the quarter, as investors continued to worry about the industry’s substantial regulatory pressures. The recent stall of new online game licenses on its platform also limits the company’s earning growth near term. China Education Group, which operates for-profit colleges, was the second largest performance detractor. During the quarter, there was an unverified “official” document circulating among investors that the Chinese government will target private higher education institutions for tighter regulation, causing some panic selling of the stock. After talking to both company management and other industry sources, we believe the document is forged, and see the potential for operation resilience, especially during the economic down turn.

Notable Portfolio Changes:

During the quarter we added fast-food chain operator Yum China Holdings and reinitiated a position in China Tourism Group Duty Free. We believe these two companies are well positioned for a domestic tourism recovery, and will ultimately gain market share from their ailing competitors. We also took the opportunity of a biotech/health care sector sell-off to add a position in leading pharmaceutical contract manufacturer Asymchem Laboratories Tianjing. Asymchem’s strong expertise in its small molecule process has helped it win a large contract with a leading global drug company to make drugs targeting the COVID-19 virus.

We exited e-commerce giant Alibaba Group, as the dual headwinds of slower consumer spending and regulatory uncertainty persist for the company. We also sold Tsingtao Beer to fund other investments, as we are concerned the company’s margin improvement may stall this year, with its recent reported strong earnings growth fueled by unsustainable large, one-off government subsidies. Additionally, we exited diesel engine manufacturer Weichai Power Co., as its product cycle looks to have peaked and we are disappointed with the lack of progress of company’s corporate governance improvement.

Outlook:

Looking ahead, we are optimistic that the headwinds that precipitated Chinese equities’ sell off in 2021 will recede. So far in 2022, we have not seen new internet regulations, and various local municipal governments are relaxing home purchase restrictions. We are also seeing some concrete progress being made on the auditing issue raised by the SEC to Chinese securities regulators. And finally we believe there will be some relaxation of travel restrictions later this year, despite the current strict lock down in Shanghai.

Top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MCDFX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-17.72% 0.70% 6.33% 8.10% 8.26% 11/30/2009

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 1.12%
Yields as of 03/31/2022
30-Day SEC Yield 1.47%
30-Day SEC Yield (excluding expense waiver) 1.47%
Dividend Yield 2.79%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2022, 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.

Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

There is no guarantee that a company will pay or continue to increase dividends. Past performance is no guarantee of future results.

 

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.