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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

-13.57%

YTD Return

(as of 05/20/2022)

$13.89

Price

(as of 05/20/2022)

$944.84 million

Fund Assets

(as of 04/30/2022)

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.

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

Fund Facts
Inception Date 09/12/1994
Fund Assets $944.84 million (04/30/2022)
Currency USD
Ticker MACSX
Cusip 577-130-206
Portfolio Turnover 37.9%
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 1.07%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 04/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund
MACSX
-4.11% -10.66% -11.33% -14.10% 2.52% 3.41% 4.10% 8.29% 09/12/1994
MSCI All Country Asia ex Japan Index
-5.16% -9.91% -12.70% -20.80% 2.95% 5.47% 5.49% 4.45%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund
MACSX
-4.50% -7.53% -7.53% -9.50% 4.38% 4.53% 4.63% 8.48% 09/12/1994
MSCI All Country Asia ex Japan Index
-2.74% -7.95% -7.95% -14.42% 5.44% 7.05% 6.05% 4.66%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asian Growth and Income Fund
MACSX
0.04% 16.00% 17.26% -10.96% 21.85% 1.34% -4.50% -0.65% 4.83% 26.90%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70%

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 03/31/2022)

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)
2.94% 30-Day SEC Yield
2.94% 30-Day SEC Yield (excluding expense waiver)
2.52% 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 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 46 funds
  • 10 YEAR
  • out of 34 funds
  • 1 YEAR
  • 3rd
  • 16 out of 27 funds
  • 3 YEAR
  • 2nd
  • 14 out of 27 funds
  • 5 YEAR
  • 3rd
  • 17 out of 25 funds
  • 10 YEAR
  • 3rd
  • 17 out of 22 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 03/31/2022)
Fund Benchmark
Number of Positions 51 1,220
Weighted Average Market Cap $121.2 billion $130.7 billion
Active Share 76.1 n.a.
Price/Cash Flow 12.0 7.9
Price/Book 2.4 1.7
Return On Equity 19.3 15.0
EPS Growth (3 Yr) 5.7% 13.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
-0.23%
Alpha
0.80
Beta
74.57%
Upside Capture
82.19%
Downside Capture
0.25
Sharpe Ratio
-0.18
Information Ratio
5.77%
Tracking Error
90.07

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 04/30/2022)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 7.6
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.0
AIA Group, Ltd. Financials China/Hong Kong 4.0
Samsung Electronics Co., Ltd. Information Technology South Korea 3.6
JD.com, Inc. Consumer Discretionary China/Hong Kong 2.8
Macquarie Korea Infrastructure Fund Financials South Korea 2.8
Housing Development Finance Corp., Ltd. Financials India 2.5
Techtronic Industries Co., Ltd. Industrials China/Hong Kong 2.2
HKT Trust & HKT, Ltd. Communication Services China/Hong Kong 2.2
United Overseas Bank, Ltd. Financials Singapore 2.0
TOTAL 34.7

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
  • Country Allocation
  • Asset Type Breakdown
  • Market Cap Exposure

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

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

Asset Type Fund
Common Equities and ADRs 88.7
Convertible Bonds 6.1
Preferred Equities 0.5
Cash and Other Assets, Less Liabilities 4.7

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 $0.07977 $0.40825 $1.37352 $1.86154 10.4% N.A.
06/28/2021 06/29/2021 $0.12445 $0.00000 $0.00000 $0.12445 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, 2022

For the quarter ending March 31, 2022, the Matthews Asian Growth and Income Fund returned -7.53% (Investor Class) and -7.48% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -7.95% over the same period.

Market Environment:

The year began in challenging fashion with numerous concerns weighing on risk assets. Already elevated inflation in the U.S. driven by supply chain issues, historically high transfer payments and a tight labor market was further exacerbated by the commencement of the ongoing conflict between the Ukraine and Russia. This will likely create structural alterations in supply chains and global geopolitics as well as increase the cost of capital. These issues have raised the prospect of “stagflation” for the first time in decades as growth appears to be weakening simultaneously, although it should be noted that this is not a base case.

Against this backdrop, the rotation from “growth” to “value” stocks has continued as companies in the financial, energy and materials sectors led the market while areas such as health care and technology struggled. Beyond the style shift in Asia, weakening consumption growth, a faltering property market and further regulatory tinkering in China led it to produce the region’s worst performance for the quarter. Hopes for an improvement in growth and rising commodity prices helped parts of Southeast Asia such as Indonesia and Thailand to positive performance.

Performance Contributors and Detractors:

The financials sector produced some of the strongest returns for the portfolio as commercial banks gained. Those in developed markets such as United Overseas Bank in Singapore and BOC Hong Kong rose as earnings growth looks to return with falling provisioning costs, improving loan growth and rising net interest margins as interest rates are increased. Bank Rakyat in Indonesia similarly rallied alongside rising rate expectations while domestic macroeconomic conditions are also improving and at a company level management’s strategy to increase the contribution of micro loans may also help margins.

Beyond financials, the portfolio’s only holding within the materials sector benefited performance as gold miner Northern Star Resources rose with gold prices, solid production numbers and ongoing upside risks to inflation. Select industrial companies such as CK Hutchison and Singapore Technologies (ST) Engineering also gained. The former’s earnings were boosted by improving activity in its port division and a gradual recovery in retail while its non-core investment in energy company Cenovus has been rising in value. ST Engineering was helped by a robust order book with rising defense spending and passenger to freight aircraft conversions.

As was the case for the benchmark, the portfolio’s holdings in China were the largest detractors to returns. Internet platform companies such as Tencent and JD.Com fell as concerns remain around additional regulation that may weigh on earnings. Arguably, the greater worry is the current economic slowdown due to COVID-19 restrictions as well as rising competition that are both hindering earnings growth, with Tencent producing its weakest quarterly revenue growth since its initial publish offering in 2004. We will continue to monitor this situation but believe that these remain companies with structural growth that are now trading at attractive valuations.

Elsewhere within the Chinese consumer sectors, Minth Group dropped significantly as the auto parts manufacturer endured a precipitous decline in earnings. Input cost inflation impacted margins, compounding the issue of weaker top-line as auto brands are still struggling with semiconductor chip shortages. Baijiu maker Wuliangye Yibin Co. fell as, despite solid earnings growth of 17% in 2021, there is some concern that its price hike is discouraging distributors as this will compress margins for the channel.

Notable Portfolio Changes:

There were no new positions initiated during the first quarter of the year despite exiting five holdings. The volatility exhibited by the market led us to prefer to hold some additional cash on hand in order to take advantage of opportunities that present themselves. Further, we were keen to bolster position sizes in existing holdings.

We exited the convertible bonds of China Education Group and Weimob as we were concerned about worsening credit quality in each. We also exited an exchangeable bond in CIMB Group in the search for superior ideas. Within equities, we closed positions in life insurer Ping An Insurance Group given it continues to struggle in improving its agency force, as well as in Ascendas India Trust.

Outlook:

The first quarter all but confirmed that rapidly rising inflation is not transitory but has a secular component and that is bringing with it concern that the global economy could end up with stagflation as growth also stumbles. This has, of course, been exacerbated by the ongoing Russia-Ukraine conflict and geopolitical tensions between the U.S. and China as supply chains have been impacted. But it is apparent to us that a confluence of alterations in supply chains, a drive for self-sufficiency in certain areas, energy transition, and labour market imbalances are just a few areas that could all have a more sustained impact on inflation.

If weaker growth, elevated inflation, U.S. monetary tightening and geopolitics are all concerns for risk assets globally, then Asia is a geography that has some relative merits. China’s growth is already at weaker levels and accompanied by lower expectations while both monetary and fiscal policy are on an easing path as Xi’s third term looms. Meanwhile in Southeast Asia it is hoped that mobility is improving and, with it, economic growth. Further, valuations are reasonably appealing at 13.9x P/E for the region and earnings growth expectations are still a respectable 12%.  

Against this backdrop of elevated risks, we remain constructive that the portfolio is built to weather such times. A focus on quality companies with pricing power, relatively visible growth and stocks with some form of income for ballast and return purposes leaves us comfortable that the portfolio can survive and thrive through such an environment. 

 

View the Fund’s Top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MACSX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-9.50% 4.38% 4.53% 4.63% 8.48% 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 1.07%
Yields as of 03/31/2022
30-Day SEC Yield 2.94%
30-Day SEC Yield (excluding expense waiver) 2.94%
Dividend Yield 2.52%

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 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.