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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

23.78%

YTD Return

(as of 10/04/2024)

$14.68

NAV

(as of 10/04/2024)

+0.21

1 Day NAV Change

(as of 10/04/2024)

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 $21.65 million (08/31/2024)
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 08/31/2024
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
2.68% 5.42% 9.95% 13.51% -3.32% n.a. n.a. 9.98%
MSCI Emerging Markets Index
1.65% 6.11% 9.86% 15.52% -2.66% n.a. n.a. 7.20%
As of 06/30/2024
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
3.56% 3.73% 8.01% 10.47% -5.58% n.a. n.a. 9.93%
MSCI Emerging Markets Index
4.01% 5.12% 7.68% 12.98% -4.68% n.a. n.a. 6.99%
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 718 funds
  • 3 YEAR
  • out of 718 funds
  • 1 YEAR
  • 3rd
  • 455 out of 776 funds
  • 3 YEAR
  • 2nd
  • 338 out of 693 funds
  • SINCE INCEPTION
  • 1st
  • 127 out of 650 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 06/30/2024)
Fund Benchmark
Number of Positions 75 1,330
Weighted Average Market Cap $190.2 billion $157.1 billion
Active Share 66.0 n.a.
P/E using FY1 estimates 14.0x 12.9x
P/E using FY2 estimates 12.2x 11.2x
Price/Cash Flow 9.5 8.2
Price/Book 2.2 1.8
Return On Equity 16.5 15.9
EPS Growth (3 Yr) 20.1% 18.8%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 08/31/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 8.6
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.5
Samsung Electronics Co., Ltd. Information Technology South Korea 5.2
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 5.1
KB Financial Group, Inc. Financials South Korea 2.5
Hyundai Motor Co. Consumer Discretionary South Korea 2.3
ICICI Bank, Ltd. Financials India 2.1
JD.com, Inc. Consumer Discretionary China/Hong Kong 2.0
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 2.0
HDFC Bank, Ltd. Financials India 2.0
TOTAL 37.3

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 06/30/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 27.1 25.1 2.0
Financials 21.2 21.9 -0.7
Consumer Discretionary 15.5 12.3 3.2
Communication Services 7.9 8.9 -1.0
Energy 4.4 5.2 -0.8
Materials 3.7 6.9 -3.2
Consumer Staples 3.4 5.2 -1.8
Real Estate 2.6 1.5 1.1
Industrials 2.5 6.9 -4.4
Health Care 1.9 3.2 -1.3
Utilities 1.7 3.0 -1.3
Cash and Other Assets, Less Liabilities 8.2 0.0 8.2

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Country Fund Benchmark Difference
India 24.8 19.2 5.6
China/Hong Kong 21.7 25.2 -3.5
Taiwan 17.4 19.3 -1.9
South Korea 11.3 12.2 -0.9
Mexico 2.2 2.1 0.1
Vietnam 2.1 0.0 2.1
United Arab Emirates 2.0 1.1 0.9
Brazil 1.8 4.2 -2.4
United States 1.8 0.0 1.8
Kazakhstan 1.6 0.0 1.6
Peru 1.4 0.3 1.1
Saudi Arabia 1.1 3.9 -2.8
Philippines 1.1 0.5 0.6
France 0.9 0.0 0.9
Poland 0.5 1.0 -0.5
South Africa 0.0 3.0 -3.0
Indonesia 0.0 1.6 -1.6
Malaysia 0.0 1.4 -1.4
Thailand 0.0 1.3 -1.3
Qatar 0.0 0.8 -0.8
Turkey 0.0 0.8 -0.8
Kuwait 0.0 0.7 -0.7
Greece 0.0 0.5 -0.5
Chile 0.0 0.4 -0.4
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 8.2 0.0 8.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 65.4 57.4 8.0
Large Cap ($10B-$25B) 14.5 22.1 -7.6
Mid Cap ($3B-$10B) 10.9 19.7 -8.8
Small Cap (under $3B) 1.0 0.8 0.2
Cash and Other Assets, Less Liabilities 8.2 0.0 8.2

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 June 30, 2024

Market Environment

  • Emerging markets performed largely in line with our expectations in the second quarter, with Taiwan, India and China leading the way, while Mexico and Brazil underperformed. Inflation on the whole is not as high as in developed markets and in the absence of rate cuts from the U.S. Federal Reserve, a lot of positive performance was driven by fundamentals and earnings growth.
  • The expansion of the artificial intelligence (AI) supply chain, led by large U.S. tech firms, was another supportive theme, particularly for semiconductor hubs in emerging markets. We also saw volatility in India and Mexico following their elections, triggered by Prime Minister Modi’s failure to win a majority and Claudia Sheinbaum’s landslide victory—sparking worries among investors that the economic status quo in both countries could be challenged.
  • By region, Asia led performance in emerging markets. Taiwan was buoyed by demand for hardware from the U.S. while India’s markets recovered from their negative reaction to the election result when it became clear Modi would form a coalition with allies. Indian local bonds also had their inaugural inclusion in the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) index, which is expected to add significant foreign investor inflows in coming quarters. Chinese equities, meanwhile, performed well despite ongoing economic challenges, helped by the government’s attempts to stabilize the real estate market and a cyclical pickup in some sectors.
  • In Latin America, higher-for-longer U.S. interest rates remained a headwind. In Mexico, though the long-term structural story remains intact, uncertainty over the potential reformist agenda of the new administration pulled markets down. High rates also hampered Brazil and market sentiment was negatively impacted by the corporate interventions of the government and concerns over its fiscal management.
      

Contributors and Detractors

  • For the quarter ended June 30, 2024, the Matthews Emerging Markets Equity Fund returned 3.73%, (Investor Class) and 3.81% (Institutional Class) while its benchmark, the MSCI Emerging Markets Index, returned 5.12% over the same period.
  • On a country basis, the top three contributors to relative performance were Taiwan and South Korea due to stock selection and Saudi Arabia due to an underweight allocation. The top three detractors were Mexico and China/Hong Kong due to stock selection and the U.S. due to an off-benchmark allocation.
  • On a sector basis, the top three contributors to relative performance were information technology (IT), communication services and consumer discretionary due to stock selection. The top three detractors were financials, industrials and real estate due to stock selection.
  • The largest contributors to absolute performance included Taiwan Semiconductor Manufacturing Co. (TSMC), a leading Taiwanese chipmaker, Tencent Holdings, a Chinese online gaming and social media conglomerate, and FPT, a Vietnamese IT services company. The top three detractors to performance included PT Bank Rakyat Indonesia (Persero), an Indonesian microfinance company, Banco BTG Pactual, a leading Brazilian financial services company, and Grupo Financiero Banorte, a leading commercial bank in Mexico.

Outlook

  • Post-COVID growth in emerging markets is starting to come through and broaden out and we think this will pave the way for consistent earnings growth over the next few years. We also see more upside to equity performance driven by North Asia and underpinned by earnings growth, a widening of AI-related adoption and improving value in certain markets.
  • Emerging markets, particularly those in Latin America, should also benefit from the onset of a monetary easing cycle in the U.S. and the decline in the value of the U.S. dollar that would likely bring, in our view. In India, we think the market will continue to progress though it is expensive. Under the new coalition government, we may see spending on growth spread out beyond infrastructure and CapEx which could yield more opportunities in consumption.
  • In China, we are cognizant to potential catalysts for growth and to potential headwinds, such as increased volatility as we approach the U.S. presidential election in November.

 

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

 

Average Annual Total Returns - MEGMX as of 06/30/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
10.47% -5.58% N.A. N.A. 9.93% 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.