01/03/1995
Inception Date
-24.04%
YTD Return
(as of 12/05/2022)
$4.33
NAV
(as of 12/05/2022)
-0.06
1 Day NAV Change
(as of 12/05/2022)
Long-term capital appreciation
Under normal circumstances, the Matthews Korea 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 South Korea. 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 | 01/03/1995 | |
| Fund Assets | $79.57 million (10/31/2022) | |
| Currency | USD | |
| Ticker | MAKOX | |
| Cusip | 577-130-305 | |
| Portfolio Turnover | 40.2% | |
| Benchmark | Korea Composite Stock Price Index | |
| Geographic Focus | South Korea | |
| Gross Expense Ratio | 1.13% | |
| Objective | Long-term capital appreciation |
| Strategy | Under normal circumstances, the Matthews Korea Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in South Korea. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health. |
| Risks |
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.
The risks associated with investing in the Fund can be found in the prospectus |
KOSPI performance data may be readjusted periodically by the Korea Exchange due to certain factors, including the declaration of dividends.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
Due to current market volatility associated with the COVID-19 pandemic, funds may experience significant negative short-term performance.
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 09/30/2022)
CATEGORY: Pacific Ex Japan Funds
| 1 YEAR | 4th | 34 out of 36 funds |
| 3 YEAR | 2nd | 10 out of 35 funds |
| 5 YEAR | 4th | 29 out of 31 funds |
| 10 YEAR | 3rd | 14 out of 21 funds |
| SINCE INCEPTION | 4th | 7 out of 7 funds |
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
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
Michael Oh is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Innovators and Korea Strategies and co-manages the Asia Growth Strategy. Michael joined Matthews Asia in 2000 and has built his investment career at the firm. Michael was promoted from Research Analyst to Assistant Portfolio Manager in 2003. In 2006 and 2007, he was promoted to Lead Manager of the Matthews Asia Innovators Strategy and the Matthews Korea Strategy, respectively. From 2000-2003, Michael’s research focused on the technology sector supporting multiple strategies managed by the founders of the firm. As a research analyst, he contributed investment ideas to the broader Matthews Asia investment teams. Michael received a B.A. in Political Economy of Industrial Societies from the University of California, Berkeley. He is fluent in Korean.
Lead Manager
Portfolio Manager
Elli Lee is a Portfolio Manager at Matthews Asia and manages the firm’s Korea Strategy. Prior to joining the firm as a Research Analyst in 2016, Elli worked at Bank of America Merrill Lynch for 10 years, most recently in Korean Equity Sales and previously as an Equity Research Analyst covering South Korea’s engineering, construction, steel and education sectors. From 2003 to 2005, Elli was an Investor Relations Specialist at Hana Financial Group in Seoul. She earned a Master of Science in Global Finance from the Hong Kong University of Science and Technology Business School and New York University Stern School of Business, and received a B.A. in Economics from Bates College. Elli is fluent in Korean.
Co-Manager
Portfolio Manager
Sojung Park is a Portfolio Manager at Matthews Asia and co-manages the firm’s Korea Strategy. Prior to joining the Matthews Asia in 2016, she earned an MBA from the University of Chicago’s Booth School of Business. From 2010 to 2013, Sojung worked as an Equity Research Analyst at HSBC Securities as primary analyst for mid-cap companies in the Korean financial services sector, and from 2009 to 2010, was an Equity Research Associate at E*Trade Securities. She received a Bachelor of Business Administration from Seoul National University and is fluent in Korean.
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 Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
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 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 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 September 30, 2022
For the quarter ending September 30, 2022, the Matthews Korea Fund returned -15.93% (Investor Class) and -15.78% (Institutional Class), while its benchmark, the Korea Composite Stock Price Index (KOSPI) returned -17.18%.
Market Environment:
The third quarter was a challenging period for emerging and Asian equity markets. Elevated inflation data continued and diminishing consumer spending in many regions dampened global sentiment and continued to spark recessionary fears. Amid this environment, South Korean equities were some of the weakest in the region. Foreign investors have been net sellers of Korean stocks, as global recessionary fears caused speculation that demand for Korean exports would fall further. Korean equities in aggregate are now some of the cheapest in the region.
Performance Contributors and Detractors:
The Fund’s allocation and stock selection within the consumer discretionary sector contributed the most to relative performance, followed by the consumer staples sector. Among the portfolio’s holdings, South Korea’s largest e-commerce player Coupang was the top contributor to the Fund’s absolute and relative performance. Coupang has been expanding its logistics and operation infrastructure in the last two years during the pandemic to cope with strong demand. The management team is focused on efficiency improvements thus we expect free cash flow to turn positive from 2023. Hyundai Mipo Dockyard (HMD), the leading shipbuilder for mid-size tankers globally, was another contributor. HMD benefited from supply-demand dynamics in tanker industry improvement, driven by replacement demand pick up and ton-mile increases.
On the other hand, the portfolio’s overweight allocation and stock selection within energy and stock selection within information technology sectors detracted the most from relative performance. S-Oil, one of the major refiners globally and the largest in South Korea, was a top detractor to performance. S-Oil exports majority of refined products globally. As global recession concerns have been rising, markets began to reflect downside risk over refinery margins in key products such as gasoline. In addition, market concerns about China increasing its export quotas for refined products have also been rising. However, we think the global refinery supply-demand outlook appears favorable to existing low-cost refiners and continue to favor S-Oil at its current valuation.
SK Innovation was another detractor to the Fund's absolute and relative performance. SK Innovation has two major businesses—a refinery business and a battery cell business. Its battery cell business is currently going through a yield improvement stage in Europe and expects to turn profitable in 2023. We continue to see a favorable risk-return profile in SK Innovation as turnaround expectation is low for the battery cell business while the refinery business generates solid cash flow.
Notable Portfolio Changes:
During the quarter, we initiated a position in KT&G, one of the top tobacco companies globally and the largest in Korea. KT&G has been gaining market share in Heat-Not-Burn (HNB) tobacco in South Korea while maintaining solid market share in the combustible tobacco market. KT&G started a three-year contract with Philip Morris International to distribute its HNB products globally under the brand of Lil which has been gaining traction. We also think the company has room to improve its shareholder return policy.
We also exited our position in LG H&HC. We think LG has built solid brands in its cosmetics line, particularly its Whoo brand. However, competition in China, where LG H&H generates over 60% of its profit, is getting fiercer. We think it is important for LG H&HC to diversify its brand portfolio apart from Whoo. We will continue to monitor and engage with LG H&HC’s management on the company’s brand strategies and development.
Outlook:
Looking ahead, several challenges remain. A big challenge in the markets is elevated inflation and the Fed’s aggressive monetary policy. That said, we believe that markets have priced in a substantial amount of uncertainty, especially within Asia. South Korea has yet to see a boom in consumption but looking ahead we anticipate it will gradually improve during the coming year. Valuations in South Korea are at levels reached during the global financial crisis and very attractive, in our view.
We remain focused on active security selection, concentrating on groundbreaking companies we believe are positioned to benefit from strong cash flows and the global recovery. We continue to look for companies that can benefit from domestic consumption, as well as South Korean companies effectively competing and innovating in global markets. We believe the pioneering companies we’ve invested in will continue to show improved cash flows and long-term growth potential.
View the Fund’s Top 10 holdings as of September 30, 2022. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MAKOX as of 09/30/2022
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.