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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

-16.14%

YTD Return (USD)

(as of 28/06/2022)

$7.22

Price (USD)

(as of 28/06/2022)

$31.37 million

Fund Assets

(as of 31/05/2022)

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, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. 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.

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

Fund Facts
Inception Date 23/03/2021
Fund Assets $31.37 million (31/05/2022)
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 Ex Japan: Consists of all countries and markets in Asia, excluding Japan but including all developed, emerging and frontier countries and markets in Asia
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 31/03/2022 0.90% ( USD ) 0.90% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Rolling 12 Month
    Returns
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As of 31/05/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
-0.59% -11.48% -22.07% -34.47% n.a. n.a. n.a. -28.51% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
0.48% -7.32% -12.28% -21.39% n.a. n.a. n.a. -16.44%
Matthews Asia Innovative Growth Fund (GBP)
-0.81% -5.88% -16.46% -26.18% n.a. n.a. n.a. -22.72% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
0.10% -1.32% -5.73% -11.33% n.a. n.a. n.a. -9.86%
As of 31/03/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
-6.73% -17.89% -17.89% -27.78% n.a. n.a. n.a. -28.77% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-2.74% -7.95% -7.95% -14.42% n.a. n.a. n.a. -14.94%
Matthews Asia Innovative Growth Fund (GBP)
-4.86% -15.55% -15.55% -24.16% n.a. n.a. n.a. -25.13% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-0.89% -5.31% -5.31% -10.32% n.a. n.a. n.a. -10.99%
For the period ended 31/03/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-27.78% n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-14.42% n.a. n.a. n.a. n.a.
Matthews Asia Innovative Growth Fund (GBP)
-24.16% n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-10.32% n.a. n.a. n.a. n.a.

Performance information for S share classe will not be shown until they have at least a one year track record. View I Class Performance.

Portfolio Characteristics

(as of 31/05/2022)
Fund Benchmark
Number of Positions 39 1,217
Weighted Average Market Cap $102.8 billion $121.8 billion
Active Share 78.8 n.a.
P/E using FY1 estimates 21.5x 11.9x
P/E using FY2 estimates 17.4x 11.0x
Price/Cash Flow 16.2 7.3
Price/Book 2.9 1.6
Return On Equity 7.7 15.1
EPS Growth (3 Yr) 27.3% 15.9%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/05/2022)
Name Sector Country % Net Assets
ICICI Bank, Ltd. Financials India 7.1
Meituan Consumer Discretionary China/Hong Kong 6.0
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.5
JD.com, Inc. Consumer Discretionary China/Hong Kong 5.3
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 5.2
Reliance Industries, Ltd. Energy India 4.0
Huazhu Group, Ltd. Consumer Discretionary China/Hong Kong 3.9
XPeng, Inc. Consumer Discretionary China/Hong Kong 3.6
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 3.6
HDFC Bank, Ltd. Financials India 3.0
TOTAL 47.2

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 31/05/2022)
  • 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 Managers

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

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Commentary

Period ended 31 March 2022

For the quarter ending 31 March 2022, the Matthews Asia Innovative Growth Fund returned -17.89%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned -7.95% over the same period.

Market Environment:

The first quarter of 2022 was broadly negative and choppy for Asian equity markets for the third consecutive quarter, led down by Chinese internet names which remained under regulatory pressure. Economic headwinds hurt risk assets globally as surging commodity prices and higher inflation introduced rhetoric of slowing global growth and prospects of stagflation. The U.S. Federal Reserve hiked rates for the first time since 2018 and signaled toward further tightening ahead. In addition, by mid-February, markets were laser focused on the fallout and implications of Russia’s unilateral, unprovoked invasion of the Ukraine.

Growth names lagged significantly behind value names across Asia, especially in Japan, as innovative companies continue to navigate supply-chain bottle necks and a less growth-conducive macro environments. These challenges serve as a reminder of the importance of holding a long-term view in Asia and the emerging markets.

Performance Contributors and Detractors:

From a regional perspective, the Fund’s overweight and stock selection in China/Hong Kong detracted the most from performance as investors sold down holdings amid concerns over China’s regulatory interventions.  On the other hand, the Fund’s overweight to Vietnam and Indonesia contributed to relative performance.

From a sector perspective, health care, communication services and consumer discretionary detracted the most from relative performance. Consumer discretionary is our biggest sector allocation—it’s where we believe innovation can flourish and where China’s regulatory moves have also hit hard. Conversely, stock selection in real estate was the top contributor to performance. While we remain interested in the real estate sector, we’re mindful that it is now highly regulated and companies in the sector don’t have complete control over their destinies. 

Looking at our holdings, some of our healthcare and communications stocks detracted the most from both absolute and relative performance. Chinese health care holdings, Wuxi Biologics, Inc., a global Contract Research, Development and Manufacturing Organization was hit by negative market sentiment when it was added to the U.S. Commerce departs Unverified List. In the communications services sector, Bilibili, Inc., a Chinese video content company, was one of the biggest detractors. The company’s operational metrics from user acquisition and engagement still trend positively but China’s policies to regulate the health and development of the country’s internet industry continue to put pressure on names in the sector. While we are cautious about the ongoing regulations, we continue to hold Bilibili as the fundamentals of the company remain healthy and its position as one of the dominant players in its field has strengthened as a result of more regulatory scrutiny.

On the other hand, LG Energy Solution, a Korean storage battery manufacturing company and spin-off of LG Chemical, was the largest contributor to performance. We participated in LG Energy’s very successful IPO in January and anticipate the majority of proceeds will aid in expanding production capacity to keep pace with rising demand for electric vehicles.

Notable Portfolio Changes:

During the quarter, we initiated a position in Trip.com, a Chinese online travel company that provides services including accommodation reservation, transportation ticketing, packaged tours and corporate travel management. We believe Trip.com is well positioned to benefit from the global re-opening and increased tourism.

Outlook:

Concerns over China’s regulatory environment may continue to cause more volatility in the region. We continue to monitor the situation very closely, though the valuation of Chinese internet companies looks very attractive currently despite these risks and we will continue to build positions in companies that we believe are well positioned to grow and benefit from consumption growth. Despite all the challenges, we are also increasingly optimistic about the negotiations around ADR delisting of Chinese stocks. We believe the outlook for offshore Chinese shares listed in Hong Kong is potentially positive and there is huge potential upside.

We are excited to see significant developments in countries like India, South Korea, Indonesia and other Southeast Asian countries as well. We continue to 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.

Current and future holdings are subject to change and risk.

 

Rolling 12 Month Returns For the period ended 31/03/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-27.78% N.A. N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-14.42% N.A. N.A. N.A. N.A.
Matthews Asia Innovative Growth Fund (GBP)
-24.16% N.A. N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-10.32% N.A. N.A. N.A. N.A.

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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