02/19/1998
Inception Date
-15.38%
YTD Return
(as of 05/31/2023)
$12.27
NAV
(as of 05/31/2023)
-0.15
1 Day NAV Change
(as of 05/31/2023)
Long-term capital appreciation
Under normal circumstances, the Matthews China 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 China. 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.
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.
These and other risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 02/19/1998 | |
| Fund Assets | $740.90 million (04/30/2023) | |
| Currency | USD | |
| Ticker | MCHFX | |
| Cusip | 577-130-701 | |
| Portfolio Turnover | 49.4% | |
| Benchmark | MSCI China Index MSCI China All Shares Index | |
| Geographic Focus | China - China includes its administrative and other districts, such as Hong Kong | |
| Gross Expense Ratio | 1.12% | |
| Objective | Long-term capital appreciation |
| Strategy | Under normal circumstances, the Matthews China Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in China. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health. |
| Risks |
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.
The risks associated with investing in the Fund can be found in the prospectus |
MSCI China Index since inception value calculated from 2/28/98.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
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.
(as of 03/31/2023)
CATEGORY: China Region
| OVERALL | 3 stars | out of 103 funds |
| 3 YEAR | 3 stars | out of 103 funds |
| 5 YEAR | 3 stars | out of 79 funds |
| 10 YEAR | 3 stars | out of 53 funds |
(as of 03/31/2023)
CATEGORY: China Region Funds
| 1 YEAR | 1st | 25 out of 108 funds |
| 3 YEAR | 3rd | 50 out of 93 funds |
| 5 YEAR | 2nd | 33 out of 74 funds |
| 10 YEAR | 2nd | 16 out of 48 funds |
| SINCE INCEPTION | 1st | 3 out of 15 funds |
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Lead Manager
Portfolio Manager
Andrew Mattock is a Portfolio Manager at Matthews and manages the firm’s China, China Small Companies and China A-Share Strategies and co-manages the Pacific Tiger, China Dividend and Emerging Markets Equity Strategies. Prior to joining Matthews in 2015, he was a Fund Manager at Henderson Global Investors for 15 years, first in London and then in Singapore, managing Asia Pacific equities. Andrew holds a Bachelor of Business majoring in Accounting from ACU. He began his career at PricewaterhouseCoopers and qualified as a Chartered Accountant.
Co-Manager
Portfolio Manager
Winnie Chwang is a Portfolio Manager at Matthews and manages the firm’s China Small Companies and China Dividend Strategies and co-manages the China, Pacific Tiger and Asia Dividend Strategies. She joined the firm in 2004 and has built her investment career at the firm. Winnie earned an MBA from the Haas School of Business and received her B.A. in Economics with a minor in Business Administration from the University of California, Berkeley. She is fluent in Mandarin and conversational in Cantonese.
Co-Manager
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews and manages the firm’s China Dividend and China A-Shares Strategies and co-manages the China and Asia ex Japan Total Return Equity Strategies. Prior to joining Matthews in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Investor share class.
Sources: Zephyr StyleADVISOR
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
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.
Visit our Glossary of Terms page for definitions and additional information.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
The MSCI India Index is a free float-adjusted market capitalization-weighted index of Indian equities listed in India.
The MSCI Korea Index is a free float-adjusted market capitalization-weighted index of Korean equities listed in Korea.
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.
Commentary
Period ended March 31, 2023
For the quarter ending March 31, 2023, the Matthews China Fund returned 0.41% (Investor Class) and 0.48% (Institutional Class), while its benchmark, the MSCI China Index, returned 4.71%.
Market Environment:
Chinese equities grinded higher, albeit with considerable volatility, even after posting some of the strongest results within global markets in the final quarter of 2022. The country’s lifting of its long-standing COVID restrictions allowed for a ‘more normal’ Lunar New Year celebration helping to boost consumption indicators, especially those focused on domestic tourism, local services and entertainment. However, spy balloons, bilateral tensions and a spike in U.S. interest rates spurred profit taking in Chinese equities in February which relinquished almost the entire year-to-date gains. In March, cross-strait tensions seemed to fade, and the Chinese government showed strong support for gaming and internet sectors along with announcing state-owned enterprise (SOE) reforms and additional fiscal stimulus which combined improved local sentiment causing A-share small-cap equities and large Hong Kong-based platform companies to bounce higher.
In the first quarter, large-cap platform companies within the information technology and communication services sectors lead the MSCI China Index higher while health care and real estate—especially smaller caps lagged.
Performance Contributors and Detractors:
The portfolio’s overweight and stock selection within the information technology and an underweight and stock selection within the consumer staples contributed to relative performance. On the other hand, the portfolio’s allocation and stock selection within the communication services detracted from performance. An overweight and stock selection within the consumer discretionary sector also detracted as some of the holdings announced weaker-than-expected numbers in their most recent earnings and hindered performance.
Among individual securities, KE Holdings—China’s leading online real estate platform—was a top contributor to both absolute and relative performance. The company has been benefiting from expectations of recovering real estate sales in China as the country’s reopening unfolds. KE Holdings is also continuing to benefit from existing home sales (which are more secular in nature driven by household formation and upgrading trends) rather than new home sales (which could be more speculative in nature). We continue to see this holding as one that would benefit from increased real estate trends this year.
On the other hand, JD.com—China’s leading e-Commerce platform company known for its authentic products as well as fast and efficient product delivery—was among the weakest performers. The company announced weaker-than-expected numbers in its most recent earnings and provided a conservative outlook for the first half of the year. JD.com’s announcement of additional investments it may make in order to fend off e-Commerce competition in the country also caused market worries. However, we continue to find the company’s value proposition compelling in China’s e-Commerce industry. JD.com has built a moat around product quality and logistics network, which are hard to replicate and may continue to benefit the company as the business moves into other areas, such as online pharmaceutical distribution.
Notable Portfolio Changes:
During the first quarter, we took the opportunity to consolidate the portfolio from 64 names at the end of Dec 2022 to 52 at the end of March 2023. We consolidated many small A-share names that were under 50 basis points (0.50%) in position, including Anjoy Food Group, Beijing Huafeng Test and Control Technology, Cambricon Technologies and Gigadevice Semiconductor. Many of these A-share positions continue to be relatively more expensive and operate in a landscape where competition continues to be rather intense.
We also added a few holdings including Ping An—the leading financial conglomerate in China with businesses in life insurance and banking and Zhejiang Supcon Technology, an industrial automation leader managing large scale factory automation projects. Ping An’s aggressive cost cutting during the pandemic resulted in a much healthier cost base. We believe China’s reopening will help with the company’s business operations and activity as life agents are able to regain mobility and sell to clients. Zhejiang Supcon has been steadily gaining both domestic and international market shares and is actively growing from selling hardware to also selling software to help digitize the next generation of factories.
Outlook:
China’s reopening continues to be bumpy with some sectors such as consumer discretionary and communication services (advertising) recovering ahead of others. We continue to monitor China’s property market developments as this is key in ensuring growth stability within the country. So far, a gradual, slightly better-than-expected property sector recovery has been seen on the ground. Industrial recovery has been weighed down by underperformance in the renewables sectors (EV/solar/wind) so far. We feel that investor sentiment has been overly bearish on concerns about slowing demand and oversupply. This continues to be a secular opportunity for growth and is key in China’s carbon neutrality transition. Platform companies in China continue to experience market sentiment volatility given varying geopolitical reactions. However, valuations are cheap, and any signs of warmer sentiment benefits a recovery in the stock prices of these platform companies more meaningfully.
Top 10 holdings as of March 31, 2023. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MCHFX as of 03/31/2023
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
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.