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Matthews Asia Growth Fund
MPACX

Snapshot
  • Unconstrained growth strategy investing across Asia Pacific’s developed, emerging and frontier markets
  • Focus on the most profitable and attractive growth opportunities in Asia
  • Highly-differentiated portfolio offers exposure to names often under-represented in broader global equity strategies

10/31/2003

Inception Date

2.78%

YTD Return

(as of 03/31/2023)

$21.42

NAV

(as of 03/31/2023)

+0.02

1 Day NAV Change

(as of 03/31/2023)

Objective

Long-term capital appreciation.

Strategy

Under normal circumstances, the Matthews Asia Growth Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia. The Fund may also invest in the convertible securities, of any duration or quality, of Asian companies. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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 10/31/2003
Fund Assets $627.64 million (02/28/2023)
Currency USD
Ticker MPACX
Cusip 577-130-867
Portfolio Turnover 47.5%
Benchmark MSCI All Country Asia Pacific 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 02/28/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund - MPACX
10/31/2003
MPACX
-8.35% -1.14% 0.05% -18.99% -3.94% -2.82% 3.68% 6.70%
MSCI All Country Asia Pacific Index
-5.84% 1.35% 1.57% -10.80% 3.12% 0.35% 4.32% 6.01%
As of 12/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund - MPACX
10/31/2003
MPACX
-1.19% 10.50% -33.12% -33.12% -5.73% -2.41% 4.19% 6.76%
MSCI All Country Asia Pacific Index
-0.21% 12.52% -16.92% -16.92% -0.48% 0.47% 4.64% 5.97%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews Asia Growth Fund - MPACX
MPACX
-33.12% -14.65% 46.76% 26.18% -16.25% 39.39% 0.92% -0.05% 1.49% 19.35%
MSCI All Country Asia Pacific Index
-16.92% -1.19% 20.07% 19.74% -13.25% 32.04% 5.21% -1.68% 0.29% 12.19%

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 12/31/2022)

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.

Ratings

  • OVERALL
  • out of 10 funds
  • 3 YEAR
  • out of 10 funds
  • 5 YEAR
  • out of 10 funds
  • 1 YEAR
  • 4th
  • 28 out of 28 funds
  • 3 YEAR
  • 4th
  • 23 out of 25 funds
  • 5 YEAR
  • 3rd
  • 16 out of 24 funds
  • 10 YEAR
  • 2nd
  • 8 out of 20 funds
  • SINCE INCEPTION
  • 2nd
  • 4 out of 9 funds

Ratings agency calculation methodology

Portfolio Managers

Taizo  Ishida photo
Taizo Ishida

Lead Manager

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Co-Manager

Portfolio Characteristics

(as of 12/31/2022)
Fund Benchmark
Number of Positions 45 1,488
Weighted Average Market Cap $61.3 billion $77.4 billion
Active Share 86.2 n.a.
P/E using FY1 estimates 22.0x 12.1x
P/E using FY2 estimates 19.7x 12.1x
Price/Cash Flow 18.0 7.3
Price/Book 3.1 1.4
Return On Equity 6.9 14.5
EPS Growth (3 Yr) 0.8% 7.6%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2022)
-4.31%
Alpha
1.08
Beta
99.59%
Upside Capture
117.28%
Downside Capture
-0.27
Sharpe Ratio
-0.42
Information Ratio
12.61%
Tracking Error
71.65

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 02/28/2023)
Name Sector Country % Net Assets
PT Bank Rakyat Indonesia Persero Tbk Financials Indonesia 4.8
Shenzhen Inovance Technology Co., Ltd. Industrials China/Hong Kong 4.5
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.3
HDFC Bank, Ltd. Financials India 4.2
Innovent Biologics, Inc. Health Care China/Hong Kong 4.0
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 3.9
Daiichi Sankyo Co., Ltd. Health Care Japan 3.9
BeiGene, Ltd. Health Care China/Hong Kong 3.6
Sony Group Corp. Consumer Discretionary Japan 3.5
H World Group, Ltd. Consumer Discretionary China/Hong Kong 3.3
TOTAL 40.0

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 12/31/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Health Care 30.6 6.8 23.8
Consumer Discretionary 18.8 14.7 4.1
Financials 13.5 19.8 -6.3
Industrials 9.5 11.5 -2.0
Communication Services 9.4 8.6 0.8
Information Technology 8.9 16.3 -7.4
Consumer Staples 4.5 5.8 -1.3
Energy 2.6 3.1 -0.5
Materials 2.0 7.4 -5.4
Real Estate 0.0 3.9 -3.9
Utilities 0.0 2.3 -2.3
Cash and Other Assets, Less Liabilities 0.1 0.0 0.1

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 39.0 25.1 13.9
Japan 30.8 31.6 -0.8
India 13.6 9.2 4.4
Australia 5.6 11.4 -5.8
Indonesia 5.2 1.2 4.0
United States 3.5 0.0 3.5
Vietnam 1.2 0.0 1.2
Singapore 1.0 2.2 -1.2
Taiwan 0.0 8.7 -8.7
South Korea 0.0 7.2 -7.2
Thailand 0.0 1.4 -1.4
Malaysia 0.0 1.0 -1.0
Philippines 0.0 0.5 -0.5
New Zealand 0.0 0.3 -0.3
Cash and Other Assets, Less Liabilities 0.1 0.0 0.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 57.9 56.8 1.1
Large Cap ($10B-$25B) 14.9 23.2 -8.3
Mid Cap ($3B-$10B) 19.0 19.1 -0.1
Small Cap (under $3B) 8.1 0.9 7.2
Cash and Other Assets, Less Liabilities 0.1 0.0 0.1

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)
12/13/2022 12/14/2022 $0.00000 $0.00000 $0.57757 $0.57757 2.6% 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 December 31, 2022

For the year ending December 31, 2022, the Matthews Asia Growth Fund returned -33.12% (Investor Class) and -32.99% (Institutional Class), while its benchmark, the MSCI All Country Asia Pacific Index, returned -16.92% over the same period. For the fourth quarter, the Fund returned 10.50% (Investor Class) and 10.58% (Institutional Class), while the benchmark returned 12.52%.

Market Environment:

2022 was a difficult year for growth investors globally—though it played out differently in Asian markets versus the U.S. and elsewhere. As inflation concerns increased early in the year, value stocks staged a tremendous rally globally. But for the next two quarters this trend moderated in Asian markets where inflation remained relatively tamer. In the fourth quarter, we saw a modest rally in Asian growth stocks—particularly after the Chinese government’s announcement in December that it planned to dismantle its zero-COVID policy. However, this rally was insufficient to erase calendar-year losses.

Another major factor for Asian markets in 2022 was the Japanese yen, which weakened significantly as much of the developed world raised interest rates to fight inflation while the Bank of Japan maintained its highly accommodative stance. The weak yen weighed on Japanese markets, which fell 16% in the year.

Performance Contributors and Detractors:

In one of the most challenging years we’ve experienced as investors, relative performance was significantly tested. At the country level, our stock selection in China/Hong Kong was the biggest detractor to performance in 2022 as our holdings encountered multiple simultaneous headwinds in the form of their growth orientation, technology focus and the negative sentiment resulting from ongoing political tensions between the U.S. and China. Stock selection in Japan was also a big detractor as low inflation persisted until late in the year and a weak yen weighed on both the economy and markets. Conversely, our lack of exposure in South Korea and underweight in Taiwan were top contributors to performance. The Fund also benefited from its overweight position and stock selection in Indonesia, which has been a relative bright spot in 2022 given its lower exposure to growth industries like information technology (IT) and communication services.

At the sector level, our stock selection in consumer discretionary was the biggest detractor while stock selection in IT and communication services also detracted from performance. Many of our holdings in these sectors—and in health care where allocation was a detractor as well as stock selection—were pressured not just by their growth orientation but also because many are Chinese.

At the holdings level, among the Fund’s bottom contributors were XPeng and Sea. Chinese electric vehicle (EV) maker XPeng was until recently one of only a few EV companies in China and serving the upper-middle segment of the market. However, 2022 saw a meaningful increase in competition which has pressured the company’s shares.

Singapore-based e-commerce and gaming platform Sea, operating mainly in Southeast Asia, experienced a decline in subscriptions as economies normalized in the wake of COVID which hurt the company’s revenues and weighed on shares. However, we remain constructive on the outlook given Sea’s dominant market share in its existing markets and growing share in new emerging markets like Brazil.

Among the Fund’s top individual contributors were Daiichi Sankyo and Bank Rakyat Indonesia. Japanese pharmaceutical Daiichi Sankyo produces Enhertu, one of the world’s leading breast cancer drugs. We are attracted to the company’s solid fundamentals and the positive outlook for Enhertu. Bank Rakyat, one of the leading Asian banks, benefited from the interest rate environment in 2022. As a growth-oriented bank it has been a long-term holding in our portfolio and we maintain our conviction in the outlook.

Notable Portfolio Changes:

In anticipation of a normalizing economic environment in a post-zero-COVID China, we shifted some capital in the fourth quarter to Chinese, growth-oriented names—including technology giants Alibaba and JD.com. We also introduced a position in Japanese commercial bank Sumitomo Mitsui as we anticipate the beginning of a potential rate-hike cycle in Japan. The bank’s fundamentals are solid and we capitalized on an attractive valuation to purchase shares.

We funded these purchases with several sales, including Bajaj Finance in India, which we trimmed as the position size had increased in our portfolio. We exited Ono Pharmaceutical in Japan, whose flagship cancer drug Opdivo has seen slowing sales as its growth matures. We also exited our position in XPeng given the increased competition it faces.

Outlook:

As we enter 2023, we see reasons for optimism. The end of zero-COVID in China should reverse the relative economic and consumption malaise the country has faced in recent years. Increased economic activity in China could also prompt a bounce-back among growth stocks, whose valuations have decreased meaningfully thanks to the value rally in the first quarter of last year.

We think Japan could be worth watching too, as the country possibly finally starts to see signs of wage inflation which, in contrast to much of the world, would be an overall economic positive for a nation that has faced over two decades of economic stagnation and low inflation. We also anticipate moderately rising interest rates as the new Bank of Japan governor pivots toward a slightly more hawkish stance—which would in turn help stabilize the yen. Given overall solid fundamentals and still-cheap valuations, this could prove an attractive combination for investors in 2023.

India remains on solid economic footing—though nascent signs of inflation thanks to high oil prices could mean higher government deficits and pose an economic headwind. In our view, India’s economic outlook will hinge heavily on what happens with domestic interest rates. That said, for investors willing to be selective, India continues to offer compelling growth-oriented investing opportunities.

Though we have no way to forecast the outcome of major, ongoing global events such as the war in Ukraine, we believe the outlook for 2023 is relatively favorable. That said, it’s a rare year which doesn’t present investors with relatively meaningful surprises, and as ever, we will remain prepared to pivot accordingly.

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

Average Annual Total Returns - MPACX as of 12/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-33.12% -5.73% -2.41% 4.19% 6.76% 10/31/2003

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%

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.