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Matthews China Dividend Fund
MCDFX

Snapshot
  • Total return strategy seeks to access the growth of China with lower volatility
  • Unconstrained all-cap portfolio with a quality bias
  • Flexible approach offers participation in both growth and value markets

11/30/2009

Inception Date

-2.71%

YTD Return

(as of 03/01/2024)

$10.42

NAV

(as of 03/01/2024)

+0.11

1 Day NAV Change

(as of 03/01/2024)

Objective

Total return with an emphasis on providing current income.

Strategy

Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

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

Fund Facts
Inception Date 11/30/2009
Fund Assets $102.03 million (01/31/2024)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 27.3%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.20%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 01/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund - MCDFX
11/30/2009
MCDFX
-9.62% -12.92% -9.62% -35.07% -16.47% -4.53% 2.68% 4.64%
MSCI China Index
-10.61% -10.56% -10.61% -28.86% -23.15% -6.79% 0.60% 0.62%
As of 12/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund - MCDFX
11/30/2009
MCDFX
-1.73% -8.38% -20.67% -20.67% -13.06% -1.25% 3.12% 5.42%
MSCI China Index
-2.40% -4.21% -11.04% -11.04% -18.31% -2.65% 1.03% 1.43%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews China Dividend Fund - MCDFX
MCDFX
-20.67% -16.75% -0.49% 24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93%
MSCI China Index
-11.04% -21.80% -21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26%

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 12/31/2023)

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.

Yield

(as of 12/31/2023)
2.29% 30-Day SEC Yield
2.29% 30-Day SEC Yield (excluding expense waiver)
3.67% Dividend Yield

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 103 funds
  • 3 YEAR
  • out of 103 funds
  • 5 YEAR
  • out of 84 funds
  • 10 YEAR
  • out of 54 funds
  • 1 YEAR
  • 4th
  • 86 out of 105 funds
  • 3 YEAR
  • 1st
  • 11 out of 92 funds
  • 5 YEAR
  • 3rd
  • 39 out of 75 funds
  • 10 YEAR
  • 1st
  • 11 out of 49 funds
  • SINCE INCEPTION
  • 1st
  • 6 out of 36 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Lead Manager

Elli  Lee photo
Elli Lee

Co-Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Co-Manager

Portfolio Characteristics

(as of 12/31/2023)
Fund Benchmark
Number of Positions 35 766
Weighted Average Market Cap $74.2 billion $112.9 billion
Active Share 77.2 n.a.
P/E using FY1 estimates 10.0x 9.7x
P/E using FY2 estimates 8.6x 8.7x
Price/Cash Flow 6.3 5.3
Price/Book 1.3 1.2
Return On Equity 14.1 12.0
EPS Growth (3 Yr) 9.8% 13.3%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2023)
1.62%
Alpha
0.81
Beta
78.25%
Upside Capture
84.14%
Downside Capture
-0.60
Sharpe Ratio
0.52
Information Ratio
10.14%
Tracking Error
89.03

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 01/31/2024)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 9.7
Alibaba Group Holding, Ltd. Consumer Discretionary 7.6
CITIC Telecom International Holdings, Ltd. Communication Services 6.4
Yangzijiang Shipbuilding Holdings, Ltd. Industrials 4.6
Wuliangye Yibin Co., Ltd. Consumer Staples 4.1
E Ink Holdings, Inc. Information Technology 3.5
Haier Smart Home Co., Ltd. Consumer Discretionary 3.5
China Merchants Bank Co., Ltd. Financials 3.4
China Suntien Green Energy Corp., Ltd. Energy 3.3
Inner Mongolia Yili Industrial Group Co., Ltd. Consumer Staples 3.3
TOTAL 49.4

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 12/31/2023)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 27.3 30.2 -2.9
Communication Services 17.2 19.7 -2.5
Financials 15.3 15.7 -0.4
Consumer Staples 8.7 5.4 3.3
Real Estate 6.6 2.6 4.0
Health Care 5.6 5.7 -0.1
Industrials 5.6 5.1 0.5
Information Technology 5.1 6.7 -1.6
Materials 4.4 3.2 1.2
Energy 3.0 3.2 -0.2
Utilities 0.0 2.4 -2.4
Cash and Other Assets, Less Liabilities 1.0 0.0 1.0

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

Asset Type Fund
Common Equities and ADRs 99.0
Cash and Other Assets, Less Liabilities 1.0
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 43.8 63.8 -20.0
Large Cap ($10B-$25B) 16.3 18.2 -1.9
Mid Cap ($3B-$10B) 19.3 15.6 3.7
Small Cap (under $3B) 19.5 2.4 17.1
Cash and Other Assets, Less Liabilities 1.0 0.0 1.0
China Exposure Portfolio Weight
Hong Kong Listed Companies 60.3
Mainland China Listed Companies 18.6
Other 11.7
ADR/GDR 8.3
Cash and Other Assets, Less Liabilities 1.0

Mainland China listed companies includes A Share and B Shares. A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

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)
12/13/2023 12/14/2023 $0.10744 $0.00000 $0.00000 $0.10744 1.0% N.A.
06/27/2023 06/28/2023 $0.32906 $0.00000 $0.00000 $0.32906 2.6% N.A.
12/13/2022 12/14/2022 $0.10770 $0.00000 $0.25441 $0.36211 2.5% N.A.
06/27/2022 06/28/2022 $0.41693 $0.00000 $0.00000 $0.41693 2.8% 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 December 31, 2023

For the year ending December 31, 2023, the Matthews China Dividend Fund returned -20.67% (Investor Class) and -20.58% (Institutional Class), while its benchmark, the MSCI China Index, returned -11.04% over the same period. For the fourth quarter, the Fund returned -8.38% (Investor Class) and -8.36% (Institutional Class), while the benchmark returned -4.21%.

Market Environment 

2023 was a disappointing year for Chinese equities and the Chinese economy overall. It’s disappointing, in our view, not just in the sense of the underwhelming recovery of Chinese consumer spending post--COVID lockdowns but also due to the lack of any significant stimulus measures by the government. Although the government did start to gradually loosen property purchase-restrictions across most cities in China, the expectations of potential home buyers regarding future house prices and their own income levels have changed. As a result, these policy changes barely helped to arrest the slump in the real estate market. As the year progressed, investors gradually gave up on the idea that the Chinese central government would step in to engineer a stronger consumption rebound. 

The challenging real estate market and the soft consumption environment have combined to create a potential formula for deflation, in our view. From what we can see, many entrepreneurs—whose animal spirits were curbed during the COVID period—are now hesitating to start any new investments in this environment. From a geopolitical standpoint, the highly anticipated Biden-Xi summit in San Francsico in November didn’t really impact the ongoing concerns of the market. And staying at the macro level, Chinese equites were a key exception in a November global equities rally that followed signals by U.S. Federal Reserve Chairman Jay Powell that the U.S. interest rate-upcycle was near an end.

Performance Contributors and Detractors

An overweight to small- and mid-cap stocks detracted from relative returns in 2023 as these holdings were hurt by the weakness of China’s economic recovery. Stock selection in mega caps also detracted.  

At the sector level, stock selections in consumer discretionary, financials and real estate were the biggest detractors to total and relative returns in the period. On the flip side, stock selection in communication services was the top contributor. The portfolio’s cash position also helped cushion some downside during the year. 

At the holdings level, Xtep International, a sportswear company, was the worst performer and second-biggest detractor to relative returns. While the company’s business has been strong in recent years, the market has started to worry about the inventory condition of the whole industry and whether domestic brands will lose market share to global brands. Alibaba Group was among the biggest detractors to total return, largely as a result of the company abruptly walking back a plan to separate and spin off its cloud business. China Education Group, a provider of vocational education services, was another detractor after the company reported increased impairment losses, narrowing margins and weaker profitability in its full-year results.

On the other hand, CITIC Telecom International Holdings, the parent company of Macau’s leading fixed line and mobile telecom operator, was the top contributor to total and relative returns during the year, as the company maintained a stable business operation and a high dividend payout policy. Miniso Group, a discount retailer with worldwide presence, was the second-largest contributor to total returns although its share price experienced high volatility during the last quarter as its valuation became rich. Yangzijiang Shipbuilding Holdings was another top contributor, as the company continued to win orders for new ships and new environment standards are seeming to prolong the current global ship ordering cycle. 

Notable Portfolio Changes 

We initiated a position in Fuyao Glass Industry Group, a leading automotive glass manufacturer, in the last quarter of the year. We believe the company is well positioned as new electric vehicles (EVs) continue to include more glass content compared with traditional vehicles. In addition, we added a position in Kanzhun, a high profile recruiting platform. Although we have not seen a clear recovery of hiring across all segments in China, a feature of Kanzhun’s services—enabling hiring managers and job applicants to communicate online—makes it especially attractive to younger segments of the workforce. 

In contrast, we sold our position in China Vanke, a real estate developer, given the significant difficulties that these firms face in trying to sell new residential properties and monetize other commercial real estate assets, such as shopping malls or warehouses, in such an uncertain environment. We also exited OPT Machine Vision Technology, a supplier of factory equipment, as the company disappointed in securing new orders in its new EV batteries business while its traditional consumer electronics customers didn’t bring in much growth.

Outlook 

We remain cautious on Chinese equities. Both domestic and international investors have had their confidence severely tested over the last three years. Unlike many other equities markets, there is no “natural” inflow into China’s market through pensions or retirement savings plans. That’s left only selected groups of companies with strong cash flow and balance sheets being active in the market, buying back their own shares. 

Among the traditional drivers of Chinese economic growth, aside from real estate, the export sector is still demonstrating some strength. However, as China grows its share of global industrial output, it raises the specter of more trade frictions alongside continuing U.S. tariffs. In terms of consumption, the third economic driver, Chinese consumers are likely to continue to behave very conservatively due to a lackluster employment market and bleak outlook for income growth. Industries with high paying jobs have unfortunately become casualties of tightened regulation and some have been subject to pay-cut directives from the government. 

Chinese policymakers, in our view, have not yet realized the real threat of deflation to the economy. Although we don’t fully subscribe to the theory of a “Japanification” of China, we believe the government needs to do a lot more to avoid this trap and the risk of a “lost decade.”. 

 

View the Fund’s Top 10 holdings as of December 31, 2023. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MCDFX as of 12/31/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-20.67% -13.06% -1.25% 3.12% 5.42% 11/30/2009

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 1.20%
Yields as of 12/31/2023
30-Day SEC Yield 2.29%
30-Day SEC Yield (excluding expense waiver) 2.29%
Dividend Yield 3.67%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 12/31/2023, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

There is no guarantee that a company will pay or continue to increase dividends. Past performance is no guarantee of future results.

 

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.