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Asia Growth

Matthews Asia Innovative Growth Fund

  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

23/03/2021

Inception Date

n.a.

YTD Return (USD)

(as of 04/08/2021)

$9.53

Price (USD)

(as of 04/08/2021)

$24.84 million

Fund Assets

(as of 30/06/2021)

Objective

Long-term capital appreciation

Strategy

The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets in companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.

Risks

The value of an investment in the Fund can go down as well as up and possible loss of principal is a risk of investing. Investments in international and emerging market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. The Fund invests in holdings denominated in foreign currencies, and is exposed to the risk that the value of the foreign currency will increase or decrease. The Fund invests primarily in equity securities, which may result in increased volatility.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 23/03/2021
Fund Assets $24.84 million (30/06/2021)
Base Currency USD
ISIN: LU2298459939 (USD) LU2298460192 (GBP)
Bloomberg Symbol MAIGIUA:LX (USD) MAIGIAG:LX (GBP)
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 31/03/2021 0.90% ( USD ) 0.90% ( GBP )

Performance

  • Monthly
  • Quarterly
As of 30/06/2021
  Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.  
Matthews Asia Innovative Growth Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.  
As of 30/06/2021
  Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.  
Matthews Asia Innovative Growth Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.  

Asia Innovative Growth Fund has commenced operations from 23 March 2021 and performance will not be shown until the fund has reached one year since inception.

Strategy Performance

  • Monthly
  • Quarterly
  • Rolling Returns
As of 30/06/2021
  Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Strategy (USD)
3.39% 5.77% 5.02% 54.39% 26.84% 24.73% 15.42% 7.13% 27/12/1999
MSCI All Country Asia ex Japan Index (USD)
-0.09% 3.66% 6.51% 40.03% 12.54% 14.82% 7.34% 7.41%  
 
 
 
 
 
 
As of 30/06/2021
          Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Strategy (USD)
3.39% 5.77% 5.02% 54.39% 26.84% 24.73% 15.42% 7.13% 27/12/1999
MSCI All Country Asia ex Japan Index (USD)
-0.09% 3.66% 6.51% 40.03% 12.54% 14.82% 7.34% 7.41%  
 
 
 
 
 
 
1 Month3 MonthsYTD1 Year3 Year5 Year10 YearSince Inception
Date Matthews Asia Innovators Fund MSCI All Country Asia ex Japan Index
1 Month 12.08% 6.84%
3 Months 29.06% 18.66%
YTD 86.72% 25.36%
1 Year 86.72% 25.36%
3 Year 25.35% 8.46%
5 Year 22.31% 13.90%
10 Year 14.87% 6.80%
Since Inception 7.05% 7.27%
 
For the years ended June 30th
Name 2021 2020 2019 2018 2017
Matthews Asia Innovators Strategy (USD)
54.39% 38.22% -4.36% 19.09% 24.21%
MSCI All Country Asia ex Japan Index (USD)
40.03% 1.97% -0.18% 10.21% 27.06%
 
 
 
 
 
 

An investment in Matthews Asia Funds is subject to risks. The performance information above is for a representative portfolio in the Matthews Asia Innovators strategy, based on the largest AUM managed by Matthews International Capital Management, LLC. This performance information does not, and it is not intended to, represent performance of the Matthews Asia Innovative Growth Fund, which commenced operations on 23 March 2021. The performance information of the representative portfolio is shown for the purpose of indicating a longer past track record and for reference only. While the Matthews Asia Innovative Growth Fund is managed in a substantially similar manner as the Matthews Asia Innovators strategy, performance results for the Matthews Innovative Growth Fund may vary from the representative portfolio for the Matthews Asia Innovators strategy. All performance is in US$ and includes all dividends and interest accrued income, realized and unrealized gains or losses, accrued expenses, and are net of all brokerage commissions and execution costs and advisory and other fees. Individual account performance will vary.

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 the original cost. Current performance may be lower or higher than performance shown. Investors investing in Funds denominated in non-local currency should be aware of the risk of currency exchange fluctuations that may cause a loss of principal.

Index since inception value calculated from 31/12/1999.

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

Portfolio Characteristics

(as of 30/06/2021)
Fund Benchmark
Number of Positions 41 1,204
Weighted Average Market Cap $143.8 billion $183.0 billion
Active Share 77.5 n.a.
P/E using FY1 estimates 28.0x 15.1x
P/E using FY2 estimates 22.7x 13.8x
Price/Cash Flow 19.8 10.3
Price/Book 2.7 2.1
Return On Equity 2.1 13.0
EPS Growth (3 Yr) 26.4% 15.5%

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 30/06/2021)
Name Sector Country % Net Assets
ICICI Bank, Ltd. Financials India 8.4
JD.com, Inc. Consumer Discretionary China/Hong Kong 7.1
Sea, Ltd. Communication Services Singapore 6.5
Bilibili, Inc. Communication Services China/Hong Kong 6.2
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 5.0
Meituan Consumer Discretionary China/Hong Kong 4.8
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.4
Silergy Corp. Information Technology China/Hong Kong 3.3
AIA Group, Ltd. Financials China/Hong Kong 3.3
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 2.9
TOTAL 51.9

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.

Source: Brown Brothers Harriman (Luxembourg) S.C.A

Portfolio Breakdown (%)

(as of 30/06/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

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

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

Source: FactSet Research Systems unless otherwise noted.
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.

Portfolio Manager

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Portfolio Manager

Commentary

Period ended 30 June 2021

The Matthews Asia Innovative Growth Fund was launched on 23 March 2021. Since inception, the Fund returned 4.40%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned 2.66% over the same period. This is the first commentary for the Matthews Innovative Growth Fund which seeks to invest in innovative quality companies that can benefit from structural growth trends and large addressable markets across Asia. We aim to invest in companies that are capable of showing sustainable growth based on their fundamental characteristics.

Market Environment:

The first six months of the year has been a volatile period for Asian equity markets. There have been two driving forces going head-to-head during the first half of the year—the ongoing recovery of the economy with improving corporate earnings versus increasing regulatory headwinds. During the first quarter of the year, the market sold off on the back of increasing regulatory challenges, especially within the Chinese internet and education sectors. During the same period equity markets rotated from growth to value.

During the second quarter, growing concerns over inflation and potential interest rate hikes began to fade. As companies reported earnings, the market started to recover as investors shifted their attention back to fundamentals. We might see these two forces continue to pull the market in either direction during the next few quarters. Toward the end of the second quarter, concerns over the rise of the Delta variant of the COVID virus spooked investors again, causing equities to give up some of the gains made during the quarter.

Performance Contributors and Detractors:

The Fund outperformed its benchmark since its inception on 23 March 2021 through June 30, 2020 driven by strong stock selection.

During the reporting period, the Fund’s health care and communication services sectors were the largest contributors to relative performance. Among individual holdings, Singapore-based gaming and e-commerce company Sea Ltd. was among the largest contributors to the Fund’s absolute and relative performance. Sea’s dual engines of growth—online gaming and e-commerce—continued to show healthy growth, contributing to its strong performance during the period. Among individual health care companies, Wuxi Biologics Inc., a CDMOs (Contract Development and Manufacturing Organization) that helps many of large global and smaller regional pharma companies get drugs developed, was the biggest contributor to absolute performance during the quarter. Chinese information technology company Silergy Corp. was another holding that performed well during the quarter. Silergy, which mainly makes power management analog semiconductors, is in our view well positioned to benefit from the import-substitution trend we have been seeing in China, as the company continued to take market share away from other global semiconductor companies. We expect this trend to continue in coming years.

On the other hand, Chinese e-commerce companies were among the laggards in the portfolio. Both Alibaba Group Holding Ltd. and JD.com, Inc. were among the detractors to absolute performance during the second quarter. The Chinese internet sector overall remained under pressure from increasing regulatory headwinds, as the Chinese government continued their investigation focusing mainly on consumer privacy and data protection. The sector will continue to be under pressure as the current investigation is on-going. However, we expect the market to reflect each company’s fundamentals when the investigation is complete. The underlying growth and earnings of Chinese internet companies have been very resilient so far and valuations are now looking very attractive. We continue to be very selective in this sector and will continue to focus on fundamentals.

Notable Portfolio Changes:

The Fund maintains an overweight in health care and consumer discretionary sectors, and started a position in Maruti Suzuki India Ltd., a subsidiary of the Japanese automotive manufacturer Suzuki. Maruti Suzuki has been introducing energy efficient models in India while also developing hybrid models. We believe that Maruti Suzuki can make a big shift to hybrids and then to electric vehicles in coming years. We have reduced our exposure to areas that are highly sensitive to the current regulatory environment. During the quarter, we exited our position in China’s Tal Education Group, which offers after-school education for students in primary and secondary school. Tal Education faces uncertainty that may directly impact their revenue in the face of a potential government crackdown on for-profit education. We will continue to monitor this space until the regulatory framework becomes more transparent.

Outlook:

Looking ahead, while there is some risk of the Delta variant threatening economic recovery in some countries, the COVID vaccination programs across Asia are also picking up pace. Regulatory environment concerns will likely persist during the second half of the year, and we will continue to monitor this situation very closely.

With the on-going concerns over the regulatory environment in China, valuations for innovative companies continue to look attractive in our view. We are also excited to see the pace of innovation picking up across Asia, and we are seeing more “unicorns” going public beyond China, particularly in South Korea, India and Indonesia. We find many innovative companies in Asia at appealing levels today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital. We continue to see many structural growth opportunities driven by rising disposable incomes and growing demand for improving productivity.

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg

 

Performance figures discussed in the Fund Manager Commentary above reflect that of the Institutional Accumulation Class Shares and has been calculated in USD. Performance details provided for the Fund are based on a NAV-to-NAV basis, with any dividends reinvested, and are net of management fees and other expenses. Past performance information is not indicative of future performance. Investors may not get back the full amount invested.

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. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.

Information contained herein is sourced from Matthews Asia unless otherwise stated. The views and opinions in this commentary were as of the report date, subject to change and may not reflect the writer’s 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.

Investors should not invest in the Fund solely based on the information in this material alone. Please refer to the Prospectus for further details of the risk factors. 

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