TOP

Matthews China Fund

Snapshot
  • High-conviction equity portfolio seeks companies benefiting from China’s domestic consumption
  • All-cap fundamental GARP approach driven by on-the-ground, proprietary research
  • Combines long-term core holdings with more opportunistic ideas to provide consistency through cycles

26/02/2010

Inception Date

8.47%

YTD Return (USD)

(as of 18/01/2021)

$28.18

Price (USD)

(as of 18/01/2021)

$139.42 million

Fund Assets

(as of 31/12/2020)

Objective

Seeks to achieve 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 equities of companies located in China, and may invest the remainder of its net assets in other permitted assets on a worldwide basis. For the purpose of this policy, China includes the People’s Republic of China, its administrative and other districts, such as Hong Kong, as well as Taiwan.

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 currency, 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. Investments in a single-country fund may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 26/02/2010
Fund Assets $139.42 million (31/12/2020)
Base Currency USD
ISIN: LU0491817440 (USD) LU0594556135 (GBP)
Bloomberg Symbol MATACNI:LX (USD) MATACGI:LX (GBP)
Benchmark MSCI China Index
Geographic Focus China and Taiwan: China includes its administrative and other districts, such as Hong Kong.
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 31/03/2020 1.25% ( USD ) 1.25% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund (USD)
6.30% 16.71% 43.38% 43.38% 15.43% 18.43% 8.23% 9.20% 26/02/2010
MSCI China Index (USD)
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 8.36%
Matthews China Fund (GBP)
3.69% 9.61% 38.50% 38.50% 15.02% 20.37% n.a. 10.74% 28/02/2011
MSCI China Index (GBP)
0.37% 5.17% 25.66% 25.66% 8.84% 17.00% n.a. 10.16%
As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund (USD)
6.30% 16.71% 43.38% 43.38% 15.43% 18.43% 8.23% 9.20% 26/02/2010
MSCI China Index (USD)
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 8.36%
Matthews China Fund (GBP)
3.69% 9.61% 38.50% 38.50% 15.02% 20.37% n.a. 10.74% 28/02/2011
MSCI China Index (GBP)
0.37% 5.17% 25.66% 25.66% 8.84% 17.00% n.a. 10.16%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews China Fund (USD)
43.38% 33.92% -19.89% 57.70% -3.95% -0.45% -2.95% 6.75% 11.90% -18.00%
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10% -18.24%
Matthews China Fund (GBP)
38.50% 29.88% -15.40% 43.82% 15.48% 4.66% 3.00% 4.49% 7.16% n.a.
MSCI China Index (GBP)
25.66% 18.88% -13.70% 40.97% 20.60% -2.27% 15.00% 2.03% 17.69% n.a.
For the period ended 31/12/2020
Name 2020 2019 2018 2017 2016 Inception Date
Matthews China Fund (USD)
43.38% 33.92% -19.89% 57.70% -3.95% 26/02/2010
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11%
Matthews China Fund (GBP)
38.50% 29.88% -15.40% 43.82% 15.48% 28/02/2011
MSCI China Index (GBP)
25.66% 18.88% -13.70% 40.97% 20.60%

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

Since inception performance for share classes with less than one year of history represents actual performance, not annualised. In addition, for share classes less than a year old, Year to Date Return is calculated since inception. Where no past performance is shown there was insufficient data available in that year to provide performance.

Performance details provided are based on a NAV-to-NAV basis with any dividends reinvested, and are net of management fees and other expenses. Performance data has been calculated in the respective currencies stated above, including ongoing charges and excluding subscription fee and redemption fee you might have to pay.

All performance quoted represents past performance and is not indicative of future performance. Investors may not get back the full amount invested. 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.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Portfolio Characteristics

(as of 31/12/2020)
55
Number of Securities

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

19.2x
P/E using FY1 estimates
17.1x
P/E using FY2 estimates
$179.6 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 31/12/2020)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 9.2
Alibaba Group Holding, Ltd. Consumer Discretionary 8.5
JD.com, Inc. Consumer Discretionary 7.1
China Merchants Bank Co., Ltd. Financials 3.7
Bilibili, Inc. Communication Services 3.5
AIA Group, Ltd. Financials 3.0
Meituan Consumer Discretionary 2.9
Midea Group Co., Ltd. Consumer Discretionary 2.7
China International Capital Corp., Ltd. Financials 2.6
New Oriental Education & Technology Group, Inc. Consumer Discretionary 2.6
TOTAL 45.8

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 31/12/2020)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 26.4 35.2 -8.8
Financials 19.5 13.5 6.0
Information Technology 12.9 6.7 6.2
Communication Services 12.7 20.1 -7.4
Health Care 9.2 6.5 2.7
Industrials 6.2 4.5 1.7
Real Estate 5.3 3.6 1.7
Consumer Staples 3.5 4.5 -1.0
Materials 3.2 2.1 1.1
Utilities 1.0 1.8 -0.8
Energy 0.0 1.6 -1.6
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 67.0 73.9 -6.9
Large Cap ($10B-$25B) 16.1 16.0 0.1
Mid Cap ($3B-$10B) 13.9 9.2 4.7
Small Cap (under $3B) 2.8 1.0 1.8
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2
China Exposure Portfolio Weight
SAR (Hong Kong) 43.3
A Shares 32.0
H Shares 14.2
Overseas Listed Companies (OL) 9.5
China-affiliated corporations (CAC) 0.8
Cash and Other Assets, Less Liabilities 0.2

Definitions: SAR (Hong Kong) 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. China 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

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.

Ratings

  • OVERALL
  • 3 YEAR
  • 5 YEAR
  • 10 YEAR
(as of 20/07/2020)

Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.

Overall Morningstar RatingTM is reflective of the USD Accumulation Share class. Fund ratings represent an opinion only and are not a recommendation to buy or sell any fund. Copyright ©2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is provided for reference purposes only.

The Overall Morningstar®️ Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.

Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

Portfolio Managers

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

}

Commentary

Period ended 30 September 2020

China Fund Commentary

For the quarter ending 30 September 2020, the Matthews China Fund returned 10.86%, while its benchmark, the MSCI China Index, returned 12.57%.

Market Environment:

Chinese monthly economic data continues to show signs of recovery as reflected in the latest manufacturing and service PMI data as well business recovery statistics. Even the slow-to-recover consumer-oriented sectors are starting to show improvement including restaurant sales, cinema box office receipts and domestic travel. Domestic recovery is occurring alongside a stabilizing export sector and improving labor market, both of which should support better earnings prospects going forward.

COVID-19 remains a risk for economies globally, including China. While small pockets of coronavirus infections still occasionally emerge, China remains successful at flattening its curve of COVID-19 infections. Vigilant about testing, quarantining known cases and contact tracing, China has had the most success among large economies in our view in combatting the virus.

Chinese equities posted solid returns in the quarter, despite negative headlines about U.S. – China relations. Political tactics have so far focused on individuals and companies, as opposed to broad economic sanctions and negative policy. To date, the actions have been more disruptive to sentiment than economically damaging to either side. Looking at the U.S. side, it is difficult to decipher which portions of the negative rhetoric have true congressional support versus what is politically motivated by the election cycle.

Performance Contributors and Detractors:

From a sector perspective, stock selection in the financials, communications services and industrials was a contributor to relative performance. On the other hand, stock selection in health care, real estate and consumer discretionary sectors was a detractor.

A contributor among individual stocks was e-commerce company JD.com, which experienced increased demand for its services during the pandemic. As the second largest e-commerce company in China, JD.com has a broad reach and its profitability is improving. Logistics-oriented businesses tend to be very capital intensive in their early years, but with much of JD.com’s logistic infrastructure already in place, we expect that the business may be less capital intensive going forward. China has many metropolitan densities and the complexity of making deliveries to most households is high, creating a competitive moat for an e-commerce player such as JD.com.

A detractor among individual stocks was property developer Times China, which focuses on developments in the Greater Bay Area in Guangdong province. This area has been earmarked for further development in high-value-adding sectors such as the technology and financial industries, and is likely to see growth in infrastructure connectivity over time. Times China has an ample land bank in this region, allowing it to continue to grow its footprint. The real estate industry has been sluggish as the pandemic has disrupted sales in China, but we continue to like the company’s long-term prospects in land banking, as well as its attractive valuations.

Notable Portfolio Changes:

In the third quarter, we added a number of new positions, including four domestically listed A-share companies. New A-share positions include two health care companies, an information technology company and an industrials company. Other new positions include a fast-growing communication services platform and two Hong Kong-listed health care companies. New positions highlight our emphasis on growing domestic consumption in China. The IMF forecasts that China will be the only large economy to generate positive growth in 2020 and domestic consumption will play an important role in maintaining China’s economic engine. As we rotated capital within the portfolio during the quarter, we were particularly interested in opportunities among China’s knowledge-based sectors, where intellectual property and research and development can help companies build competitive moats.

Outlook:

Chinese manufacturing data points to a continued v-shaped recovery and a bright spot within the data suggests that small, private businesses are beginning to participate within the rebound. Fiscal stimulus in China has been incremental in scope and highly targeted, a trend we expect may continue. Interest rates in China have moved higher, reflecting China’s economic resilience amid the pandemic. Looking ahead, we expect to see continued recovery in China’s economic activity. While China is not immune from a global slowdown, it may be better positioned than other large economies to maintain its long-term growth.

Schools have reopened in Wuhan, the first city to be hit by the pandemic earlier in the year. China’s effective health care response has played an important role in reopening school, businesses and government offices across China. Keeping the coronavirus under control is key to maintaining China’s economic recovery, and we continue to see reasons for optimism on the public health front. Positive sentiment among domestic Chinese consumers is spurring increased economic activity. U.S. – China political tensions could heat up heading into the U.S. election, but escalating rhetoric may have little impact on either economy.

Rolling 12 Month Returns For the period ended 31/12/2020
Name 2020 2019 2018 2017 2016 Inception Date
Matthews China Fund (USD)
43.38% 33.92% -19.89% 57.70% -3.95% 26/02/2010
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11%
Matthews China Fund (GBP)
38.50% 29.88% -15.40% 43.82% 15.48% 28/02/2011
MSCI China Index (GBP)
25.66% 18.88% -13.70% 40.97% 20.60%

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. 

Index Definitions