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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 03/12/2021)

$8.98

Price (USD)

(as of 03/12/2021)

$46.58 million

Fund Assets

(as of 31/10/2021)

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 $46.58 million (31/10/2021)
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 30/09/2021 0.90% ( USD ) 0.90% ( GBP )

Performance

  • Monthly
  • Quarterly
As of 30/11/2021
  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 30/09/2021
  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 30/11/2021
  Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Strategy (USD)
-5.36% -5.29% -8.09 3.01% 28.48% 22.01% 15.44% 6.34% 27/12/1999
MSCI All Country Asia ex Japan Index (USD)
-3.86% -6.60% -5.79% 0.66% 10.86% 10.85% 8.23% 6.66%  
 
 
 
 
 
 
As of 30/09/2021
          Average Annual Total Returns  
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Strategy (USD)
-3.90% -11.20% -6.74% 20.36% 26.51% 20.30% 16.50% 6.46% 12/27/1999
MSCI All Country Asia ex Japan Index (USD)
-4.15% -9.23% -3.32% 14.73% 9.50% 10.44% 8.80% 6.84%  
 
 
 
 
 
 
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 Sept 30th
Name 2021 2020 2019 2018 2017
Matthews Asia Innovators Strategy (USD)
20.36% 63.79% 2.72% -0.53% 25.10%
MSCI All Country Asia ex Japan Index (USD)
14.73% 18.16% -3.15% 1.74% 23.02%
           
 
 
 
 
 
 

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 31/10/2021)
Fund Benchmark
Number of Positions 42 1,209
Weighted Average Market Cap $139.0 billion $152.8 billion
Active Share 81.1 n.a.
P/E using FY1 estimates 32.8x 13.7x
P/E using FY2 estimates 26.2x 12.9x
Price/Cash Flow 26.5 9.7
Price/Book 5.7 1.9
Return On Equity 3.2 13.0
EPS Growth (3 Yr) 16.7% -3.0%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/10/2021)
Name Sector Country % Net Assets
Sea, Ltd. Communication Services Singapore 7.0
Meituan Consumer Discretionary China/Hong Kong 5.8
Bilibili, Inc. Communication Services China/Hong Kong 5.7
Silergy Corp. Information Technology China/Hong Kong 5.3
ICICI Bank, Ltd. Financials India 5.0
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.9
HDFC Bank, Ltd. Financials India 4.3
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 4.3
Bajaj Finance, Ltd. Financials India 4.1
JD.com, Inc. Consumer Discretionary China/Hong Kong 3.9
TOTAL 50.3

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 31/10/2021)
  • 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 September 2021

For the quarter ending 30 September 2021, the Matthews Asia Innovative Growth Fund returned -11.49%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned -9.23% over the same period.

Market Environment:

The new regulatory policies around China’s Internet sector dominated headlines in Asia as the Chinese government continued to release their guidelines on consumer data protection, workers’ rights and online gaming restrictions on minors during the quarter. The China Evergrande Group default risk and recent power outage incidents further dented investors’ sentiments during the quarter. While we expect new regulatory policies to create short-term volatilities in the market and disruptions in operating environments in various verticals in China’s Internet industry, we believe that these policies are aimed at improving long-term sustainability of the markets and to foster more innovation in the industry. Most policies that have been announced so far have been targeted at providing fair competition among market participants, protecting workers rights and restricting minors’ time spent online. These should all benefit healthy development of consumer markets in China and should eventually benefit companies that participate in these industries over the long term. In our view, internet companies continue to be some of the most innovative companies in the region and remain as one of the best positioned industries to benefit from rising disposable income in the region. While we believe that the regulatory environment concerns in China might persist longer, the valuation of Chinese Internet companies currently looks very attractive.

Performance Contributors and Detractors:

On a country basis, India performed the best while China continued to detract from performance during the third quarter. While we expect concerns around Chinese regulatory risks to persist in the near term, we are seeing some valuation support at current stock price levels as many companies are now trading near their historical lows. India has been the bright spot as the number of COVID-19 cases continued to trend down during the quarter. We continue to see attractive prospects in India, and are encouraged to be seeing more unicorns (private companies valued at or over US$1 billion) coming to the market.

On a company basis, Sea Ltd., a consumer internet company based in Singapore, was the largest contributor to relative performance during the quarter. Sea continued to execute well within both e-commerce and online gaming, and has been relatively safe from regulatory risks compared with internet companies in China. Bajaj Finance was also a strong contributor to performance as the company has emerged as one of the potential leaders in the fintech industry in India.

Our holdings in China mostly underperformed during the quarter, as concerns over regulatory risks persisted and the latest incidents of power outages also further dampened investor sentiment. Meituan Dianping, China’s largest food delivery service, and Bilibili Inc., one of China’s leading internet entertainment platforms, were among the bottom performers. We continue to hold both companies and added to both positions during the quarter, as the fundamentals of these companies remained healthy and their position as dominant players in their respective fields have strengthened as a result of more regulatory scrutiny.

Notable Portfolio Changes:

During the quarter, we consolidated our positions in China, reducing the total number of holdings while increasing the weightings in higher-conviction names. We sold out of Yatsen Holding Limited, a cosmetics company in China. The cosmetics market in China continues to be very competitive and the growth of Yatsen has been lower than expected. We bought back Chinese agriculture-focused technology platform firm Pinduoduo, as the share price corrected meaningfully during the quarter. Pinduoduo has reported their first profit during the quarter and their user engagement continued to improve strongly. We also added Crompton Greaves, one of the most innovative players in India’s consumer electronics industry in our view and we expect the company to continue to expand their product categories.

Outlook:

The concerns over China’s regulatory environment may cause more volatility in the region. We continue to monitor the situation very closely, making necessary changes as new policies are announced. 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 difficult challenges in China, 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.

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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