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Asia Growth & Income

Matthews Asian Growth and Income Fund MACSX

Snapshot
  • Seeks upside participation while aiming to provide some downside protection in Asia ex Japan
  • Utilize income-paying equities and convertible bonds to help mitigate downside risk and volatility
  • Offers a relatively stable means of participating in Asia’s long-term growth

09/12/1994

Inception Date

2.22%

YTD Return

(as of 05/14/2021)

$18.45

Price

(as of 05/14/2021)

$1.50 billion

Fund Assets

(as of 04/30/2021)

Objective

Long-term capital appreciation with some current income.

Strategy

Under normal circumstances, the Matthews Asian Growth and Income 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 common stock, preferred stock and other equity securities, and convertible securities as well as fixed-income securities, of any duration or quality, of companies located in Asia. The Fund attempts to offer investors a relatively stable means of participating in a portion of the Asian region’s growth prospects, while providing some downside protection, in comparison to a portfolio that invests purely in common stocks. The strategy of owning convertible bonds and dividend-paying equities is designed to help the Fund to meet its investment objective while helping to reduce the volatility of its portfolio.

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 and frontier 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 09/12/1994
Fund Assets $1.50 billion (04/30/2021)
Currency USD
Ticker MACSX
Cusip 577-130-206
Portfolio Turnover 36.3%
Benchmark MSCI All Country Asia ex Japan 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 1.09%

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 Asian Growth and Income Fund
MACSX
1.03% 1.36% 3.27% 36.94% 8.68% 8.14% 5.35% 9.23% 09/12/1994
MSCI All Country Asia ex Japan Index
2.49% 1.15% 5.31% 48.39% 9.83% 14.88% 6.83% 5.54%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund
MACSX
-0.38% 2.22% 2.22% 46.17% 8.04% 8.00% 5.59% 9.22% 09/12/1994
MSCI All Country Asia ex Japan Index
-2.52% 2.75% 2.75% 57.77% 9.20% 14.12% 6.96% 5.46%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Asian Growth and Income Fund
MACSX
16.00% 17.26% -10.96% 21.85% 1.34% -4.50% -0.65% 4.83% 26.90% -10.62%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70% -17.07%

MSCI AC Asia ex Japan Index since inception value calculated from 8/31/94.

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)
1.14% 30-Day SEC Yield
2.60% Dividend Yield

Dividend Yield (trailing) Source: FactSet Research Systems, Bloomberg, Matthews
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 56 funds
  • 3 YEAR
  • out of 56 funds
  • 5 YEAR
  • out of 50 funds
  • 10 YEAR
  • out of 29 funds
  • 1 YEAR
  • 3rd
  • 21 out of 28 funds
  • 3 YEAR
  • 3rd
  • 17 out of 28 funds
  • 5 YEAR
  • 4th
  • 21 out of 25 funds
  • 10 YEAR
  • 3rd
  • 10 out of 16 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 4 funds

Ratings agency calculation methodology

Portfolio Managers

Robert J. Horrocks, PhD photo
Kenneth  Lowe, CFA photo
Kenneth Lowe, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Siddharth  Bhargava photo
Siddharth Bhargava

Co-Manager

Portfolio Characteristics

(as of 03/31/2021)
57
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

$147.4 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 04/30/2021)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 7.3
Tencent Holdings, Ltd. Communication Services China/Hong Kong 6.1
Samsung Electronics Co., Ltd. Information Technology South Korea 4.2
AIA Group, Ltd. Financials China/Hong Kong 3.8
Macquarie Korea Infrastructure Fund Financials South Korea 2.4
Techtronic Industries Co., Ltd. Industrials China/Hong Kong 2.3
Housing Development Finance Corp., Ltd. Financials India 2.2
NetEase, Inc. Communication Services China/Hong Kong 1.9
United Overseas Bank, Ltd. Financials Singapore 1.9
Yum China Holdings, Inc. Consumer Discretionary China/Hong Kong 1.8
TOTAL 33.9

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 03/31/2021)
  • Sector Allocation
  • Country Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 19.1 23.5 -4.4
Financials 18.5 18.3 0.2
Consumer Discretionary 17.6 18.2 -0.6
Communication Services 11.9 11.6 0.3
Industrials 10.5 5.4 5.1
Consumer Staples 6.4 4.8 1.6
Real Estate 5.9 4.1 1.8
Health Care 4.2 4.7 -0.5
Materials 2.6 4.5 -1.9
Utilities 1.3 2.2 -0.9
Energy 0.0 2.5 -2.5
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9

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

Country Fund Benchmark Difference
China/Hong Kong 46.6 50.4 -3.8
South Korea 12.5 15.0 -2.5
Taiwan 9.6 15.4 -5.8
India 7.6 10.9 -3.3
Singapore 6.9 2.5 4.4
Australia 3.7 0.0 3.7
France 3.0 0.0 3.0
Indonesia 2.7 1.4 1.3
United States 2.0 0.0 2.0
Philippines 1.3 0.7 0.6
Malaysia 1.2 1.5 -0.3
Thailand 1.0 2.1 -1.1
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9

Not all countries are included in the benchmark index(es).

Asset Type Fund
Common Equities and ADRs 86.7
Convertible Bonds 10.5
Preferred Equities 1.0
Cash and Other Assets, Less Liabilities 1.9
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 53.5 64.8 -11.3
Large Cap ($10B-$25B) 12.5 19.1 -6.6
Mid Cap ($3B-$10B) 23.5 15.1 8.4
Small Cap (under $3B) 7.4 1.0 6.4
Unassigned 1.2 0.0 1.2
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9

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 $0.05757 $0.00000 $0.00475 $0.06232 0.4% N.A.
06/24/2020 06/25/2020 $0.10611 $0.00000 $0.00000 $0.10611 0.7% 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, 2021

For the quarter ending March 31, 2021, the Matthews Asian Growth and Income Fund returned 2.22% (Investor Class and Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 2.75%. 

Market Environment:

The first six weeks of the year continued the pathway that followed the coronavirus pandemic of last March—a steady and significant move upward. That appeared to change in the middle of February as the reality of lofty valuations and expectations were brought to the forefront of investors’ minds given a steepening yield curve across much of the globe with inflation beginning to rear its head. Shipping costs, oil prices, metal prices and soft commodities were all seeing increases. The rise in longer dated bond yields helped to spark somewhat of a rotation away from the conceptual growth stocks with limited near-term earnings but much promise, and caused a bid for more classic “value” stocks including banks and commodities.

The rotation thus far has been mild in Asia, with many growth stocks still in positive territory year-to-date but it has created downside volatility for the first time in many months. And this potential shift remains a key focal point as the U.S. embarks upon ever greater fiscal stimulus. This dynamic drove the less innovation-heavy developed parts of Asia such as Hong Kong and Singapore to be two of the stronger performing markets during the quarter, although the region was led by technology-heavy Taiwan as we are in the midst of a strong tech cycle. Parts of Southeast Asia such as Indonesia, Malaysia and the Philippines lagged given weaker currencies and rising COVID restrictions in the case of the latter two countries.  

Performance Contributors and Detractors:

The largest contributor to performance came from the portfolio’s technology sector as Taiwan Semiconductor Manufacturing gained. The company enjoys a strong competitive position as the world’s leading foundry with superior technology, and the current backdrop for silicon demand has been decidedly strong driven by structural trends including high performance computing and 5G adoption. This led management to announce a US$100 billion capital expenditure plan for the next three years, demonstrating the enormous scale of demand it enjoys. Elsewhere within technology, services provider Tata Consultancy Services rose on guidance for the next year, targeting double digit revenue growth as it believes it can win large deals as IT spending recovers, particularly within banking and financial services.

The Fund’s holdings within the industrial sector also benefited performance with power tool manufacturer Techtronic rising rapidly. The company once again gained market share from competitors and was helped by the stay at home DIY boom, growth of its new outdoor cordless equipment and excitement over its role in U.S. infrastructure spending. Property management company Ever Sunshine Limited rallied as it beat earnings expectations, delivering over 80% growth for 2020 as it won third party contracts and grew its value added services.

The consumer discretionary sector was the largest detractor to returns, with auto parts supplier Minth Group the weakest of these. The stock struggled with declining revenues in 2020 due to COVID-induced demand drops for its auto customers and there are concerns that this will continue into the first half of 2021 given chip shortages for auto makers. Chinese appliance manufacturer Midea Group fell on concerns that rising raw material prices will hurt margins while South Korean life care solutions provider COWAY dropped on rising domestic competition for its water purifier business as well as higher costs. Elsewhere, gold miner Northern Star Resources struggled against a declining gold price and the convertible bond in e-commerce retailer Pinduoduo dropped after strong performance in 2020 and as competition in group buying in China heats up.

Portfolio Changes: 

A number of alterations were made to the portfolio during the quarter with six new positions, including two in convertible bonds. These included increasing our weight in domestic China as the market struggled during the first quarter. ENN Natural Gas was added as the firm has restructured where the majority of its value comes from its holding in gas distribution company ENN Energy. We like the company as we believe it can deliver double digit profit growth as gas connections and usage rise, while it is also attractively valued at only 6x EV/EBITDA and offering a 1.8% dividend yield. Sports retailer Topsports was another addition as the firm is a leading partner in China for selling Nike and Adidas products. Similarly we expect that the company has an attractive growth outlook given a growing category, increasing its share with brand partners and improving store profitability. E-commerce retailer JD.Com was another addition as we believe the company will likely gain share from Alibaba and improve margins over time as it pushes into new categories and benefits from its focus on selling authentic items and its strong logistics. We also believe that there is significant value on offer given a raft of investments including in fintech, logistics, cloud, and health care as well as maintaining a very large cash pile.

Elsewhere we initiated a position in Australian casino and digital game maker Aristocrat. We expect solid growth as casinos recover, the company gains yet more share from superior products and as it executes on digital. Within convertible bonds, we added positions Chinese pharmaceutical company Hansoh and in an exchangeable of Malaysian bank CIMB. These additions were funded through the exit of equity positions in China Resources Land, CLP Holdings, China Yangtze Power, Singtel, Hanon Systems, Vinamilk alongside a Baozun convertible bond.

Outlook:

The macroeconomic environment appears relatively robust as the unprecedented wave of monetary and fiscal stimulus enacted globally has been bolstered yet further while COVID infection rates are generally dropping and vaccine rollouts have begun, albeit this differs markedly by country. The increase in domestic savings rates and potential for a further boost from infrastructure spending will likely spur the U.S. to strong economic growth. Accompanying this is also likely to be solid growth from China as the recovery continues with economic data already demonstrating some form of a return to normalcy.

With the world’s two largest economies driving global economic growth higher, the backdrop appears reasonable for risk assets. However, there are some issues to be wary of. Firstly, not all countries are likely to enjoy such a swift return to growth. Further, higher deficits come with prospective balance sheet risks down the line and tax hikes are inevitably part of the conversation. These policy moves will also likely continue to drive yet higher inflation expectations and this has already impacted yield curves across the globe. What appears to be boundless stimulus has driven equity valuations to levels that are rather frothy, exemplified by high retail participation and arguably illogical investment vehicles such as SPACs and the more bizarre, newly created non-fungible tokens market. One needs to be wary of such euphoria, particularly as rising rates increases the cost of capital.

As a quality-oriented growth and income portfolio, we are naturally more inclined toward businesses that can deliver a combination of high profitability, visible EPS growth and sustainable dividend yields. We believe that these ongoing changes in policy and a broader economic recovery may produce a fruitful backdrop for portfolio returns as investors become more discerning. Further, the return of volatility to Asian markets that we are already beginning to witness should benefit those quality businesses that can deliver through market cycles.

As of March 31, 2021, the securities mentioned comprised the Matthews Asian Growth and Income Fund in the following percentages: Taiwan Semiconductor Manufacturing Co., Ltd., 7.5%; Tata Consultancy Services, Ltd., 1.5%; Techtronic Industries Co., Ltd., 2.2%; Ever Sunshine Lifestyle Services Group, Ltd., 1.5%; Minth Group, Ltd., 1.5%; Midea Group Co., Ltd. A Shares, 1.5%; Coway Co., Ltd., 1.5%; Northern Star Resources, Ltd., 1.0%; Pinduoduo, Inc., Cnv., 0.000%, 12/01/2025, 1.1%; ENN Natural Gas Co., Ltd. A Shares, 1.6%; Topsports International Holdings, Ltd., 1.5%; JD.com, Inc. A Shares, 1.5%; Aristocrat Leisure, Ltd., 1.5%; Hansoh Pharmaceutical Group Co., Ltd., Cnv., 0.000%, 01/22/2026, 1.3%; Cerah Capital, Ltd. (CIMB), 0.000%, Cnv., 08/08/2024, 1.2%.

 

The Fund held no positions in China Resources Land, CLP Holdings, China Yangtze Power, Singapore Telecommunications Limited (Singtel), Hanon Systems, Vinamilk, Baozun Inc., convertible bond. Alibaba Group Holding Ltd, Nike, Inc., or Adidas AG.  Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MACSX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
46.17% 8.04% 8.00% 5.59% 9.22% 09/12/1994

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 1.09%
Yields as of 03/31/2021
30-Day SEC Yield 1.14%
Dividend Yield 2.60%

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 and frontier 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.