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Matthews Emerging Markets Equity Fund
MEGMX

Snapshot
  • Seeks Alpha in Global Emerging Markets—capitalizes on consumption and innovation trends
  • Quality Growth Portfolio—based on deep, holistic analysis
  • All-Cap, Company-First Approach—emphasizes fundamental research over top-down country or sector allocation

04/30/2020

Inception Date

17.29%

YTD Return

(as of 11/06/2024)

$13.91

NAV

(as of 11/06/2024)

-0.12

1 Day NAV Change

(as of 11/06/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Equity 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 emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund may also invest in companies located in developed countries; however, the Fund may not invest in any company located in a developed country if, at the time of purchase, more than 20% of the Fund’s assets are invested in developed market companies.

Risks

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets 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 04/30/2020
Fund Assets $23.29 million (09/30/2024)
Currency USD
Ticker MEGMX
Cusip 577-130-651
Portfolio Turnover 26.4%
Benchmark MSCI Emerging Markets Index
Geographic Focus Emerging Markets - Countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe
Fees & Expenses
Gross Expense Ratio 1.70%
Net Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Equity Fund - MEGMX
04/30/2020
MEGMX
7.75% 9.68% 18.47% 27.19% 0.27% n.a. n.a. 11.65%
MSCI Emerging Markets Index
6.72% 8.88% 17.24% 26.54% 0.82% n.a. n.a. 8.65%
As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Equity Fund - MEGMX
04/30/2020
MEGMX
7.75% 9.68% 18.47% 27.19% 0.27% n.a. n.a. 11.65%
MSCI Emerging Markets Index
6.72% 8.88% 17.24% 26.54% 0.82% n.a. n.a. 8.65%
For the years ended December 31st
Name 2023 2022 2021
Matthews Emerging Markets Equity Fund - MEGMX
MEGMX
8.43% -20.94% -0.60%
MSCI Emerging Markets Index (USD)
10.27% -19.74% -2.22%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Year to Date and Since Inception performance with less than one year of history represents actual performance, not annualized.

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 06/30/2024)

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 711 funds
  • 3 YEAR
  • out of 711 funds
  • 1 YEAR
  • 1st
  • 118 out of 775 funds
  • 3 YEAR
  • 2nd
  • 248 out of 695 funds
  • SINCE INCEPTION
  • 1st
  • 96 out of 647 funds

Ratings agency calculation methodology

Portfolio Managers

Sean  Taylor photo
Sean Taylor

Lead Manager

Alex  Zarechnak photo
Alex Zarechnak

Lead Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Co-Manager

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Co-Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Portfolio Characteristics

(as of 09/30/2024)
Fund Benchmark
Number of Positions 80 1,277
Weighted Average Market Cap $163.2 billion $158.8 billion
Active Share 66.8 n.a.
P/E using FY1 estimates 15.1x 13.3x
P/E using FY2 estimates 13.1x 11.9x
Price/Cash Flow 8.4 8.7
Price/Book 2.3 1.9
Return On Equity 14.6 15.9
EPS Growth (3 Yr) 12.6% 17.4%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 10/31/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 8.6
ICICI Bank, Ltd. Financials India 3.8
Tencent Holdings, Ltd. Communication Services China/Hong Kong 3.7
HDFC Bank, Ltd. Financials India 2.8
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 2.8
SK Hynix, Inc. Information Technology South Korea 2.5
Hon Hai Precision Industry Co., Ltd. Information Technology Taiwan 2.5
Ping An Insurance Group Co. of China, Ltd. Financials China/Hong Kong 1.8
Antofagasta PLC Materials Chile 1.8
Itau Unibanco Holding SA Financials Brazil 1.7
TOTAL 32.0

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 09/30/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 27.9 22.8 5.1
Consumer Discretionary 23.9 14.0 9.9
Information Technology 16.0 22.2 -6.2
Communication Services 8.7 9.4 -0.7
Consumer Staples 5.0 5.2 -0.2
Real Estate 4.8 1.6 3.2
Health Care 3.3 3.6 -0.3
Industrials 2.6 6.8 -4.2
Materials 2.6 6.6 -4.0
Energy 1.8 4.8 -3.0
Utilities 0.8 2.9 -2.1
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

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 36.9 27.9 9.0
India 19.3 19.5 -0.2
Taiwan 10.0 17.5 -7.5
South Korea 8.5 10.4 -1.9
Brazil 3.8 4.8 -1.0
Indonesia 2.8 1.6 1.2
United States 2.4 0.0 2.4
Vietnam 2.1 0.0 2.1
United Arab Emirates 2.0 1.2 0.8
Singapore 1.6 0.0 1.6
Philippines 1.5 0.6 0.9
Chile 1.5 0.4 1.1
Peru 1.1 0.3 0.8
Thailand 1.0 1.5 -0.5
Saudi Arabia 0.8 3.8 -3.0
South Africa 0.8 3.1 -2.3
Mexico 0.8 1.9 -1.1
Poland 0.4 0.9 -0.5
Malaysia 0.0 1.5 -1.5
Qatar 0.0 0.8 -0.8
Kuwait 0.0 0.7 -0.7
Turkey 0.0 0.6 -0.6
Greece 0.0 0.5 -0.5
Hungary 0.0 0.2 -0.2
Colombia 0.0 0.1 -0.1
Czech Republic 0.0 0.1 -0.1
Egypt 0.0 0.1 -0.1
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 70.7 59.1 11.6
Large Cap ($10B-$25B) 17.4 22.6 -5.2
Mid Cap ($3B-$10B) 7.2 17.8 -10.6
Small Cap (under $3B) 2.0 0.4 1.6
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

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.

Risk Metrics (3 Yr Return)

(as of 06/30/2024)
-1.31%
Alpha
0.94
Beta
92.35%
Upside Capture
98.85%
Downside Capture
-0.49
Sharpe Ratio
-0.15
Information Ratio
6.16%
Tracking Error
88.40

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

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)
12/13/2023 12/14/2023 $0.21539 $0.00000 $0.00000 $0.21539 1.8% N.A.
12/13/2022 12/14/2022 $0.20142 $0.00000 $0.00000 $0.20142 1.7% N.A.
12/14/2021 12/15/2021 $0.18047 $0.68627 $0.43302 $1.29976 8.5% N.A.
12/15/2020 12/16/2020 $0.00000 $0.35583 $0.00000 $0.35583 2.3% N.A.

 

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 September 30, 2024

Market Environment

  • Emerging markets performed well overall despite experiencing volatility related to concerns over a U.S. slowdown, China’s economic headwinds and sustainability of the artificial intelligence (AI) boom. Toward the end of the quarter, the Federal Reserve’s 50 basis point (O.50%) interest rate cut—and expectations of further cuts—helped to support market gains.
  • India’s equity market delivered a robust performance. Economic growth rates remain high and following the formation of a coalition government after the general election, there are signs that growth is becoming more balanced to include services and consumption as well as infrastructure and industry.
  • In North Asia, Taiwan’s technology-heavy market was challenged despite the potential growth opportunities that AI-linked segments offer, in part as prior performance had been strong and as questions arose over valuations. South Korea’s market underperformed against the benchmark with semiconductor stocks particularly soft. Meanwhile, China’s economy continued to struggle with weak consumer sentiment and declining property prices. Toward the end of the quarter its markets rallied after the central bank launched a broad stimulus package with measures to add liquidity, aid the property market and boost equity markets.
  • Latin America’s major markets faced their own domestic headwinds. In Mexico, uncertainty over potential policies by the new president and their impact for the private sector weighed on market performance and sentiment. Meanwhile Brazil’s equity markets posted resilient performance. However, inflation remained high and the central bank is currently in a rate-increasing cycle.

Contributors and Detractors

  • For the quarter ended September 30, 2024, the Matthews Emerging Markets Equity Fund returned 9.68%, (Investor Class) and 9.77% (Institutional Class) while its benchmark, the MSCI Emerging Markets Index, returned 8.88% over the same period.
  • On a country basis, the top three contributors to relative performance were China/Hong Kong due to stock selection, the U.S. due to an off-benchmark allocation and Turkey due to zero allocation. The top three detractors were South Korea and India due to stock selection and Kazakhstan due to an off-benchmark allocation.
  • On a sector basis, the top three contributors to relative performance were consumer discretionary due to an overweight allocation, industrials and real estate due to stock selection. The top three detractors were information technology (IT), consumer staples and financials due to stock selection.
  • The largest contributors to absolute performance included Alibaba Group, the largest e-commerce platform company in China, Tencent Holdings, an online gaming and social media conglomerate, and Meituan, China’s largest food delivery service and internet platform company. The top three detractors included Samsung Electronics, a South Korean semiconductor and consumer electronics maker, SK Hynix, a South Korean semiconductor company, and Hyundai Motor, a South Korean automotive manufacturer.

Outlook

  • The Fed’s rate cut will, we think, provide an impetus for a number of central banks in emerging markets to cut their own rates which should be favorable for businesses and economies. This is a significant turning point particularly for economies in Asia in our view. Fed rate cuts typically also bring downward pressure on the U.S. dollar which is often a tailwind for emerging economies.
  • In China, it will take time to see if the stimulus measures provide a sustainable catalyst for recovery. Corporate earnings are coming through in some areas including e-commerce and internet platforms. Companies more directly tied to China’s domestic economy are facing greater challenges with margins on certain consumer sectors still under pressure.
  • In India, earnings growth is feeding through to equity returns but valuations remain expensive. Thus, finding businesses where rates of growth support valuation multiples is critical. Across emerging markets, we expect volatility to continue, particularly as we approach and pass through the U.S. election. Further out, we think  market performance will start to center around domestic economic expansion and less on specific drivers like U.S. technology-related growth.

 

Top 10 holdings as of September 30, 2024. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MEGMX as of 09/30/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
27.19% 0.27% N.A. N.A. 11.65% 04/30/2020

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. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.70%
Net Expense Ratio 1.12%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2025. Please see the Fund’s prospectus for additional details.

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets 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.