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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

3.21%

YTD Return

(as of 05/14/2021)

$20.27

Price

(as of 05/14/2021)

$423.94 million

Fund Assets

(as of 04/30/2021)

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.

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

Fund Facts
Inception Date 11/30/2009
Fund Assets $423.94 million (04/30/2021)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 81.8%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 04/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
4.39% 3.45% 5.45% 37.88% 9.82% 14.87% 10.26% 11.24% 11/30/2009
MSCI China Index
1.40% -5.96% 0.97% 37.16% 8.92% 16.66% 7.46% 7.41%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-0.05% 1.02% 1.02% 43.77% 8.42% 14.21% 10.11% 10.91% 11/30/2009
MSCI China Index
-6.29% -0.43% -0.43% 43.81% 8.41% 16.29% 7.49% 7.34%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews China Dividend Fund
MCDFX
24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93% 13.35% 27.81% -14.44%
MSCI China Index
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10% -18.24%

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 03/31/2021)

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 03/31/2021)
0.95% 30-Day SEC Yield
2.59% Dividend Yield

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

Ratings

  • OVERALL
  • out of 82 funds
  • 3 YEAR
  • out of 82 funds
  • 5 YEAR
  • out of 71 funds
  • 10 YEAR
  • out of 51 funds
  • 1 YEAR
  • 4th
  • 80 out of 101 funds
  • 3 YEAR
  • 3rd
  • 52 out of 75 funds
  • 5 YEAR
  • 3rd
  • 45 out of 63 funds
  • 10 YEAR
  • 1st
  • 7 out of 44 funds
  • SINCE INCEPTION
  • 1st
  • 6 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 03/31/2021)
47
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

13.3x
P/E using FY1 estimates
11.4x
P/E using FY2 estimates
$84.2 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 04/30/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 7.7
SITC International Holdings Co., Ltd. Industrials 3.6
China Education Group Holdings, Ltd. Consumer Discretionary 3.3
Shanghai Baosight Software Co., Ltd. Information Technology 3.2
Shimao Services Holdings, Ltd. Real Estate 3.1
China Suntien Green Energy Corp., Ltd. Energy 2.8
Alibaba Group Holding, Ltd. Consumer Discretionary 2.7
Postal Savings Bank of China Co., Ltd. Financials 2.6
CITIC Telecom International Holdings, Ltd. Communication Services 2.6
Pharmaron Beijing Co., Ltd. Health Care 2.4
TOTAL 34.0

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 03/31/2021)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Communication Services 17.0 20.5 -3.5
Consumer Discretionary 16.2 33.9 -17.7
Industrials 12.0 4.7 7.3
Financials 10.6 14.5 -3.9
Consumer Staples 9.7 4.4 5.3
Information Technology 9.4 6.0 3.4
Real Estate 6.6 4.0 2.6
Health Care 4.6 6.7 -2.1
Materials 4.2 2.2 2.0
Energy 3.1 1.2 1.9
Utilities 2.4 2.0 0.4
Cash and Other Assets, Less Liabilities 4.2 0.0 4.2

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 95.8
Cash and Other Assets, Less Liabilities 4.2
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 25.2 73.5 -48.3
Large Cap ($10B-$25B) 12.5 15.5 -3.0
Mid Cap ($3B-$10B) 35.4 10.5 24.9
Small Cap (under $3B) 22.7 0.5 22.2
Cash and Other Assets, Less Liabilities 4.2 0.0 4.2
China Exposure Portfolio Weight
SAR (Hong Kong) 49.1
H Shares 15.8
A Shares 9.1
B Shares 8.2
China-affiliated corporations (CAC) 6.1
Overseas Listed Companies (OL) 4.2
Unassigned 3.3
Cash and Other Assets, Less Liabilities 4.2

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 $0.03802 $0.00000 $0.00000 $0.03802 0.2% N.A.
06/24/2020 06/25/2020 $0.36498 $0.00000 $0.00000 $0.36498 2.3% 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, 2021

For the quarter ending March 31, 2021, the Matthews China Dividend Fund returned 1.02% (Investor Class) and 1.02% (Institutional Class), while its benchmark, the MSCI China Index, returned -0.43%.

Market Environment:

Chinese equity markets were volatile during the first quarter. While stock prices rose early in the quarter, broad-market gains in the benchmarks were erased by quarter end. Firstly, the Chinese central bank started to tighten mortgage regulations in certain regions where real estate price have gone up too fast, and also began examining small business loans that have been misused for property speculation. The hope for a global recovery also started to turn to worry with the possibility of an early ending of global monetary loosening, given the sharp increase of U.S. Treasury yield.

On the geopolitical front, the first high level meeting of senior diplomats from the new Biden administration and their Chinese counterparts turned into a public quarrel. And investors were reminded that U.S. securities regulators will enact to delist Chinese companies that do not comply with American auditing standards for three years in a row. The Hong Kong market was also spooked by the news that the Hong Kong government will raise the stamp duty tax on shares traded on Hong Kong stock exchanges to raise fiscal revenue. Finally, on the last few trading days of the quarter, news broke that a mysterious family office in New York which heavily invested in many Chinese companies went bust, and its prime brokers were liquidating some of those shares in rapid fire sale. This further dampened market sentiment, especially for the high-flying Chinese growth stocks.

Performance Contributors and Detractors:

SITC International, a leading intra-region container shipping company was the top contributor in the quarter. The strong performance was due to stronger-than-expected annual results announced in early March. Baioo Family Interactive, a mobile game developer, was also among the top contributors. Baioo announced in February that Tencent Holdings, the leading game publisher in China, made a minority investment in the company and markets welcomed this news as it is viewed as an endorsement on Baioo’s quality and suggests future cooperation. 

On the other hand, XD Inc., another mobile game developer, detracted the most performance during the quarter. XD has heavily invested in its mobile gamer community platform, thus the loss in that segment in 2020 surprised the market. We believe the gamer community is a unique asset for XD, which allows gamers and game publishers to by-pass the commission taken by middle men and app stores. Minth Group was another detractor as the stock was negatively impacted by the news that the separate listing of its battery-hosting business could be cancelled due to regulation changes. However, we believe this does not impact the company’s business fundamentals.

Notable Portfolio Changes:

During the quarter, we initiated a position in Haier Smart Home listed in Germany’s stock exchange at a significant discount to the company’s A and H shares listed in Shanghai and Hong Kong. Haier Smart Home mainly engages in the research, development, production and sales of smart home appliances and we like the company’s diverse market exposure, especially its significant presence in the U.S. market. We believe Haier could be taking market share with its own manufacturing capacity acquired from General Electronics a few years ago. In addition, we have initiated position in two consumer staples stocks, Uni-President China Holdings which manufactures beverages and instant noodles and Jiajiayue Group, a super market chain operator. Uni-President China’s beverage sales were negatively impacted last year due to restricted travelling and outdoor activities due to COVID but we believe its sales should recover this year. We also think the company’s growth in self-heating rice category will supplement its slow growing instant noodle business over the longer term. Jiajiayue Group and other super market retailers’ shares were significantly de-rated by the market due to concerns of competition from community-based group buying apps. However, we believe Jiajiayue, with its efficient supply chain and comprehensive offering such as cooked meals, is well poised to compete and survive in this challenging market.

We have taken profit and exited our positions from Gree Electric Appliances, China International Capital Corporation, Accton Technology and JD Health International, and deploy capital somewhere else.

Outlook:

We remain optimistic about both the near-term and long-term growth prospects in China. In the near term, Chinese equities market and its economy may decouple as Chinese equities have run ahead of fundamentals with ample global liquidity. Keeping the coronavirus under control is key to maintaining China’s V-shaped economic recovery. While the global economy starts to recover with the help of COVID vaccines and interest rates begin to normalize, Chinese equities may correct from high growth expectation and present good opportunities for long-term investors.

Over the long term, we expect that China’s growth will continue to be driven by growing domestic consumption. The depth and diversity of the opportunity set in China continues to expand, with a notable uptick in IPOs over the past 12 months. Key themes that we are following include technology upgrades, health and wellness trends, services that enhance quality of life and premium consumer goods. The team continues to look for attractive long-term growth opportunities driven by the Chinese consumer.

 

As of 3/31/2021, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages: SITC International Holdings Co., Ltd., 3.8%; Baioo Family Interactive, Ltd., 1.2%;   XD, Inc., 0.9%; Minth Group, Ltd., 2.2%; Haier Smart Home Co., Ltd. D Shares, 1.8%; Uni-President China Holdings, Ltd, 2.2%;  Jiajiayue Group Co., Ltd. A Shares, 1.8%. The Fund held no positions in Tencent Holdings; General Electronics, Gree Electric Appliances, China International Capital Corporation, Accton Technology and JD Health International. Current and future portfolio holdings are subject to change and risk.

 

Average Annual Total Returns - MCDFX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
43.77% 8.42% 14.21% 10.11% 10.91% 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 1.15%
Yields as of 03/31/2021
30-Day SEC Yield 0.95%
Dividend Yield 2.59%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2021, 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.

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.