TOP
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

-0.48%

YTD Return

(as of 11/30/2021)

$19.21

Price

(as of 11/30/2021)

$381.15 million

Fund Assets

(as of 10/31/2021)

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 $381.15 million (10/31/2021)
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
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 10/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-0.66% 0.36% 1.12% 12.82% 13.78% 11.56% 11.43% 10.35% 11/30/2009
MSCI China Index
3.16% -2.01% -13.95% -9.12% 11.64% 10.39% 7.71% 5.66%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-3.49% -9.20% 1.80% 13.12% 10.61% 11.47% 12.24% 10.49% 11/30/2009
MSCI China Index
-5.01% -18.13% -16.59% -7.24% 6.09% 9.28% 8.90% 5.43%
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 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.

Yield

(as of 09/30/2021)
0.72% 30-Day SEC Yield
2.69% Dividend Yield

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

Ratings

  • OVERALL
  • out of 87 funds
  • 3 YEAR
  • out of 87 funds
  • 5 YEAR
  • out of 72 funds
  • 10 YEAR
  • out of 53 funds
  • 1 YEAR
  • 2nd
  • 35 out of 103 funds
  • 3 YEAR
  • 3rd
  • 45 out of 81 funds
  • 5 YEAR
  • 3rd
  • 36 out of 64 funds
  • 10 YEAR
  • 1st
  • 8 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 09/30/2021)
Fund Benchmark
Number of Positions 46 740
Weighted Average Market Cap $63.0 billion $165.0 billion
Active Share 89.4 n.a.
P/E using FY1 estimates 13.7x 12.0x
P/E using FY2 estimates 11.8x 10.8x
Price/Cash Flow 9.4 8.8
Price/Book 1.7 1.8
Return On Equity 14.9 12.8
EPS Growth (3 Yr) 16.9% -4.5%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2021)
5.59%
Alpha
0.72
Beta
89.41%
Upside Capture
80.19%
Downside Capture
0.53
Sharpe Ratio
0.42
Information Ratio
10.79%
Tracking Error
75.36

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 10/31/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 4.8
Shanghai Baosight Software Co., Ltd. Information Technology 4.7
China Suntien Green Energy Corp., Ltd. Energy 4.3
Silergy Corp. Information Technology 3.9
Alibaba Group Holding, Ltd. Consumer Discretionary 3.8
Postal Savings Bank of China Co., Ltd. Financials 3.7
CITIC Telecom International Holdings, Ltd. Communication Services 3.3
BYD Co., Ltd. Consumer Discretionary 2.9
Pharmaron Beijing Co., Ltd. Health Care 2.8
Bosideng International Holdings, Ltd. Consumer Discretionary 2.8
TOTAL 37.0

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 09/30/2021)
  • 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 95.4
Cash and Other Assets, Less Liabilities 4.6
China Exposure Portfolio Weight
SAR (Hong Kong) 43.8
H Shares 19.8
A Shares 9.6
B Shares 8.2
Overseas Listed Companies (OL) 7.3
China-affiliated corporations (CAC) 4.8
Unassigned 1.9
Cash and Other Assets, Less Liabilities 4.6

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)
06/28/2021 06/29/2021 $0.37761 $0.00000 $0.00000 $0.37761 1.7% N.A.
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 September 30, 2021

For the quarter ending September 30, 2021, the Matthews China Dividend Fund returned -9.20% (Investor Class) and -9.11% (Institutional Class), while its benchmark, the MSCI China Index, returned -18.13%.

Market Environment:

Chinese equities were under extreme pressure during the third quarter, as market participants were shocked by regulatory developments in China around data security and the anti-monopolistic behavior of certain internet companies. These measures were announced soon after the severe measures focused on the after-school tutoring industry at the end of the second quarter. Lackluster consumption growth data and news around the potential for large real estate developer China Evergrande Group to default on its bonds weighed on market sentiment quite negatively as well.

The MSCI China Index, which has significant exposure to the internet sector, was down -18.1% during the quarter. While China’s domestic A-share market performed relatively better, it was also down significantly during the quarter. Market participants were initially quite confused with the Chinese Communist Party’s goal of “common prosperity” as stated by the Party during a high-level official meeting. Government officials and policy experts clarified that “common prosperity” does not mean robbing wealth from the rich but rather enabling people of all backgrounds to have a fair share of success in society. In early September, President Xi Jinping announced that a third stock exchange on mainland China, the “Beijing Stock Exchange,” will be set up to focus on serving small- and medium-size companies. We believe it is a clear signal that the Party is not going to ditch private entrepreneurs. In addition, in September China officially submitted its application to join the CPTPP (the Comprehensive and Progressive Agreement on Trans Pacific Partnership). This is also a clear signal that China wants to continue to remain open to global trade and investment while maintaining the pace of economic reform.

Performance Contributors and Detractors:

China Suntien Green Energy, a natural gas utility company with significant exposure in alternative energy, was the top contributor to Fund performance during the third quarter. Market participants were excited about the possibility that rising coal prices could lead to higher electricity prices and higher emission standards could raise natural gas demand by industrial companies in Hebei province, where Suntien operates its pipeline. Given that the share price doubled during a single quarter, we have taken some profit and trimmed the position. Shanghai Baosight Software, an industrial software developer and data center operator, reported 50% earnings growth for the second quarter, helping to make it the second largest contributor to absolute Fund performance during the quarter. Kunlun Energy, another gas utility company, is the third largest performance contributor, as it completed the divestment of a gas pipeline and paid out a significant share of the proceeds to shareholders via a special dividend.

On the contrary, Shimao Services Holdings, a property management company which performed well for the first half of the year, was the largest absolute performance detractor for the quarter. Weighing on Shimao’s stock price were concerns about whether China Evergrande Group’s financial distress could spread to the entire real estate industry in China, and potentially cause a significant slowdown of the property management industry’s growth as well. We share those concerns, but still believe the property management industry is much more focused on the existing housing stock with recurrent revenue income, rather than “lumpy” property sales. In addition, the financial position of the property management industry is also much stronger than property developers. For now, we continue to like Shimao Service’s focus on high end residential properties, with expanding service into commercial and public institutions. Two internet giants, Tencent Holdings and Alibaba Group, were the second and third largest absolute performance detractors during the quarter as their share prices were hammered due to regulatory concerns.

Notable Portfolio Changes:

During the third quarter, we re-initiated a position in Hainan Meilan International Airport. After the airport’s parent company, the HNA Group, declared bankruptcy earlier this year, the restructuring of HNA’s assets is in our view likely to result in the Hainan provincial government taking control of the infrastructure assets, which could be beneficial for Hainan Meilan to improve financials and consolidate other airport assets on the island province. We are also hopeful that the company will benefit from the re-opening of domestic and international travel. Another portfolio addition was China Jushi, a leading manufacturer of glass fiber, which is increasingly used in many sectors such as wind power turbines, electric vehicles and construction. Jushi is already the largest glass fiber manufacturer in China, and with its U.S. plant is ramping up this year, could benefit from potential infrastructure stimulus programs in the U.S.

We have exited the positions of Topsports International and New China Life, as we think these two companies are increasingly facing strong structural challenges to grow their revenue and earnings, thus we decided to redeploy capital elsewhere. In addition, we have exited three ADRs (American Depository Receipts), namely Miniso Group Holdings, Kanzhun and Full Truck Alliance, as ADR issuers are facing increasing regulatory risks from both the U.S. and China—data security demands from China and delisting threats from the U.S. We think it is sensible to allocate capital accordingly.

Outlook:

The structural consumption growth trend in China faces a temporary slowdown in 2021 in our view, caused by weak consumer sentiment and strict government measures seeking to stop the spread of COVID-19 variants. Meanwhile, the ongoing manufacturing and industrial up-cycles moderated recently on challenges from raw material cost inflation and supply chain shortages. We believe China’s equity markets have largely priced in a rising inflation expectation and near-term growth moderation. Looking ahead, we remain constructive on Chinese equities, anticipating a positive inflection point in monetary and fiscal policies in China to support its domestic economy.

 

As of September 30, 2021, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages: China Suntien Green Energy Corp., 6.2%; Shanghai Baosight Software Co., 4.2%;  Kunlun Energy Co., 2.0%; Shimao Services Holdings, 2.7%; Tencent Holdings, 6.2%; Alibaba Group Holding, 1.9%;  Hainan Meilan International Airport Co., 2.0%; and China Jushi Co., 1.4%.

The Fund held no positions in China Evergrande Group, Topsports International, New China Life, Miniso Group Holdings, Kanzhun, and Full Truck Alliance.

Current and future portfolio holdings are subject to change and risk. There is no guarantee that a company will pay or continue to increase dividends.

Earnings growth is not representative of the fund’s future performance.

Average Annual Total Returns - MCDFX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
13.12% 10.61% 11.47% 12.24% 10.49% 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 09/30/2021
30-Day SEC Yield 0.72%
Dividend Yield 2.69%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 09/30/2021, 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.

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.