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Matthews Asia Innovators Fund
MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

-20.57%

YTD Return

(as of 08/12/2022)

$14.98

NAV

(as of 08/12/2022)

+0.13

1 Day NAV Change

(as of 08/12/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators 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 that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. 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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

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

Fund Facts
Inception Date 12/27/1999
Fund Assets $681.34 million (07/31/2022)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 220.5%
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 07/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
-3.99% 0.48% -22.11% -27.77% 11.99% 8.28% 12.07% 4.72%
MSCI All Country Asia ex Japan Index
-1.13% -5.03% -17.09% -19.65% 2.61% 2.08% 5.40% 5.65%
As of 06/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
4.37% 0.07% -18.88% -32.88% 12.73% 10.28% 12.42% 4.93%
MSCI All Country Asia ex Japan Index
-4.40% -8.90% -16.14% -24.78% 2.41% 3.39% 5.80% 5.72%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Innovators Fund - MATFX
MATFX
-13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11%
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 12/31/99.

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 06/30/2022)

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 54 funds
  • 3 YEAR
  • out of 54 funds
  • 5 YEAR
  • out of 49 funds
  • 10 YEAR
  • out of 36 funds
  • 1 YEAR
  • 4th
  • 28 out of 36 funds
  • 3 YEAR
  • 1st
  • 2 out of 35 funds
  • 5 YEAR
  • 1st
  • 2 out of 31 funds
  • 10 YEAR
  • 1st
  • 1 out of 21 funds
  • SINCE INCEPTION
  • 3rd
  • 8 out of 11 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Portfolio Characteristics

(as of 06/30/2022)
Fund Benchmark
Number of Positions 40 1,201
Weighted Average Market Cap $98.1 billion $110.6 billion
Active Share 77.6 n.a.
P/E using FY1 estimates 21.9x 11.6x
P/E using FY2 estimates 18.3x 10.7x
Price/Cash Flow 16.8 7.1
Price/Book 3.1 1.6
Return On Equity 6.0 14.5
EPS Growth (3 Yr) 4.1% 11.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2022)
10.90%
Alpha
1.11
Beta
128.07%
Upside Capture
83.46%
Downside Capture
0.54
Sharpe Ratio
0.80
Information Ratio
12.95%
Tracking Error
67.78

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 07/31/2022)
Name Sector Country % Net Assets
ICICI Bank, Ltd. Financials India 6.8
JD.com, Inc. Consumer Discretionary China/Hong Kong 5.5
Meituan Consumer Discretionary China/Hong Kong 5.4
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 4.8
H World Group, Ltd. Consumer Discretionary China/Hong Kong 4.5
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 4.1
Tencent Holdings, Ltd. Communication Services China/Hong Kong 3.8
XPeng, Inc. Consumer Discretionary China/Hong Kong 3.6
Bajaj Finance, Ltd. Financials India 3.5
Reliance Industries, Ltd. Energy India 3.4
TOTAL 45.4

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 06/30/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 36.8 15.8 21.0
Financials 20.2 20.4 -0.2
Communication Services 12.5 10.4 2.1
Consumer Staples 7.7 5.3 2.4
Information Technology 5.0 21.4 -16.4
Real Estate 4.5 4.1 0.4
Health Care 3.9 4.0 -0.1
Energy 3.9 3.7 0.2
Industrials 3.7 6.6 -2.9
Materials 1.1 5.2 -4.1
Utilities 0.0 3.1 -3.1
Cash and Other Assets, Less Liabilities 0.7 0.0 0.7

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 64.7 47.3 17.4
India 18.1 14.2 3.9
Indonesia 4.3 2.0 2.3
Taiwan 3.5 16.0 -12.5
South Korea 3.4 12.5 -9.1
Vietnam 2.2 0.0 2.2
Singapore 1.4 3.4 -2.0
Thailand 0.9 2.1 -1.2
Philippines 0.8 0.8 0.0
Malaysia 0.0 1.6 -1.6
Cash and Other Assets, Less Liabilities 0.7 0.0 0.7

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 62.1 58.6 3.5
Large Cap ($10B-$25B) 24.0 21.1 2.9
Mid Cap ($3B-$10B) 11.7 18.5 -6.8
Small Cap (under $3B) 1.4 1.7 -0.3
Cash and Other Assets, Less Liabilities 0.7 0.0 0.7

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 $0.00000 $1.10849 $3.22827 $4.33676 18.5% 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 June 30, 2022

For the first half of 2022, the Matthews Asia Innovators Fund returned -18.88% (Investor Class) and -18.82% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -16.14% over the same period. For the quarter ending June 30, 2022, the Fund returned 0.07% (Investor Class) and 0.13% (Institutional Class), while the benchmark returned -8.90%.

Market Environment:

The first half of the year was a challenging period. Elevated inflation data and diminishing consumer spending in many regions dampened global sentiment and sparked recessionary fears. While Asian equity markets endured choppy waters they performed well in the second quarter, experiencing less downside than commodity heavy, weak-performing EMEA (Europe, Middle East, Africa) and LatAm regions. In particular, Chinese equities saw a strong rebound—in both Hong Kong-listed stocks and local A-Shares. Chinese fiscal and monetary support, combined with more lenient zero-COVID policy implementation, a reduction of regulatory pressure on internet and platform monopolies and progress on real estate re-financing roadblocks enabled a rebound in sentiment and economic activity. Conversely, South Korea was a major market laggard followed by Taiwan, Japan and India. In terms of investing styles, Asian growth stocks continued to trail value stocks, especially in Japan, and small caps suffered more than their larger cap regional peers.

Performance Contributors and Detractors:

From a regional perspective, the Fund’s stock selection within China/Hong Kong and Singapore detracted the most to relative performance for the first half of the year. On the other hand, the Fund’s underweight to and stock selection within South Korea contributed the most to relative performance. From a sector perspective, the Fund’s overweight and stock selection to higher growth communication services names detracted the most from relative performance for the period. Consumer discretionary is the biggest sector allocation and the top contributor to performance. It is also where we believe innovation can flourish.

Turning to individual securities, Chinese consumer discretionary holdings H World Group, which is mainly engaged in multi-brand hotel operations, and Trip.com Group, a Chinese multinational online travel company, were the largest contributors to performance. Both companies performed well based on the expectation that China’s zero COVID policy will ease and travel activities will pick up in the country. On the other hand, communications services holdings Sea and Bilibili were among the largest detractors to performance. While Sea, an internet gaming and e-commerce company in Singapore, has achieved impressive track record in establishing sizable market share across different countries, increased uncertainty around their internet gaming revenue trends contributed to poor performance.

Bilibili, a Chinese video content company, continued to suffer from China’s policies to regulate the health and development of the country’s internet industry. However, the company’s operational metrics from user acquisition and engagement still trend positively and while we remain cautious about the ongoing regulations, we continue to hold Bilibili as the fundamentals of the company remain healthy and its position as one of the dominant players in its field has strengthened as a result of more regulatory scrutiny.

Notable Portfolio Changes:

During the second quarter, we initiated a position in Chinese health care company Innovent Biologics. Innovent, which develops and manufactures high-quality medicines for the treatment of major diseases such as cancer, rallied on positive sentiment around the likelihood it will get FDA approval for new therapy trials. Additionally, we initiated a position in Pinduoduo, a Chinese e-commerce platform offering a wide range of products including groceries, fashion, beauty and electronics. While Pinduoduo has been a loss-making company for most of its existence, it is now profitable and recent earnings results show improvement in its margin profile.

During the quarter we also exited a few positions including two Chinese stocks, Flat Glass Group which is principally involved in the research, development and sales of glass products, and Contemporary Amperex Technology, a lithium-ion battery manufacturer. In both cases we took the opportunity to take some profits and invest in other attractive Chinese companies. 

Outlook:

Looking ahead, we believe markets may see more volatility as they come to terms with the severity of Fed hikes, tighter global liquidity and protracted inflation.  That said, we believe that markets have priced in a substantial amount of uncertainty, especially within Asia and China, and not withstanding a sudden and severe downturn of global economic activity or a geopolitical shift, we believe there may be upside to come.

In particular, China should be positioned well for a pickup in domestic activity as the government is starting to support consumers and small and medium enterprises (SMEs) through gradual release of stimulus programs. Unlike the interest rate cycle in the West, interest rates are easing in China which may help lower the cost of capital for companies. In other parts of Asia, shopping mall operators in Southeast Asia stand to benefit from resumption of tourism activities.

We continue to find many innovative companies in Asia at appealing levels today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital.

View the Fund’s Top 10 holdings as of June 30, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 06/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-32.88% 12.73% 10.28% 12.42% 4.93% 12/27/1999

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%

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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

 

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.