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Asia Small Company

Matthews Asia Small Companies Fund

Portfolio Positioning
  • Seeks alpha in innovative, capital efficient entrepreneurial companies in Asia ex Japan
  • Focus on firms that have a strong competitive advantage through pricing power, distribution capability, and/or differentiated technologies and services
  • Bias toward businesses that cater to rising domestic consumer demand

30/04/2013

Inception Date

9.27%

YTD Return (USD)

(as of 22/01/2021)

$20.98

Price (USD)

(as of 22/01/2021)

$31.96 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 small companies located in the Asia ex Japan Region, and may invest in other permitted assets on worldwide.

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 Fund invests in smaller companies, which are more volatile and less liquid than larger companies.

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

Fund Facts
Inception Date 30/04/2013
Fund Assets $31.96 million (31/12/2020)
Base Currency USD
ISIN: LU0871674296 (USD) LU0871674379 (GBP) LU0871674023 (EUR)
Bloomberg Symbol MATASCI:LX (USD) MATASSI:LX (GBP) MAASCIE:LX (EUR)
Benchmark MSCI All Country Asia ex Japan Small Cap 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 1.00%
Total Expense Ratio As of 31/03/2020 1.50% ( USD ) 1.50% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
12.81% 24.27% 46.12% 46.12% 13.65% 13.69% n.a. 8.88% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
6.44% 19.72% 26.60% 26.60% 3.49% 7.76% n.a. 4.68%
Matthews Asia Small Companies Fund (GBP)
10.08% 16.66% 41.22% 41.22% 13.23% 15.55% n.a. 12.76% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
3.96% 13.22% 22.69% 22.69% 3.13% 9.39% n.a. 8.48%
As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
12.81% 24.27% 46.12% 46.12% 13.65% 13.69% n.a. 8.88% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
6.44% 19.72% 26.60% 26.60% 3.49% 7.76% n.a. 4.68%
Matthews Asia Small Companies Fund (GBP)
10.08% 16.66% 41.22% 41.22% 13.23% 15.55% n.a. 12.76% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
3.96% 13.22% 22.69% 22.69% 3.13% 9.39% n.a. 8.48%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014
Matthews Asia Small Companies Fund (USD)
46.12% 17.53% -14.53% 30.80% -1.09% -11.08% 11.14%
MSCI All Country Asia ex Japan Small Cap Index (USD)
26.60% 7.58% -18.63% 33.84% -2.05% -3.28% 2.56%
Matthews Asia Small Companies Fund (GBP)
41.22% 14.03% -9.84% 19.38% 18.87% -6.49% n.a.
MSCI All Country Asia ex Japan Small Cap Index (GBP)
22.69% 3.43% -13.57% 22.25% 16.83% 2.32% n.a.
For the period ended 31/12/2020
Name 2020 2019 2018 2017 2016 Inception Date
Matthews Asia Small Companies Fund (USD)
46.12% 17.53% -14.53% 30.80% -1.09% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
26.60% 7.58% -18.63% 33.84% -2.05%
Matthews Asia Small Companies Fund (GBP)
41.22% 14.03% -9.84% 19.38% 18.87% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
22.69% 3.43% -13.57% 22.25% 16.83%

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)
73
Number of Securities

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

29.4x
P/E using FY1 estimates
22.2x
P/E using FY2 estimates
$5.0 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 31/12/2020)
Name Sector Country % Net Assets
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 3.6
Silergy Corp. Information Technology China/Hong Kong 3.5
Phoenix Mills, Ltd. Real Estate India 2.4
Kingdee International Software Group Co., Ltd. Information Technology China/Hong Kong 2.4
Shriram City Union Finance, Ltd. Financials India 2.1
Innovent Biologics, Inc. Health Care China/Hong Kong 2.0
Airtac International Group Industrials China/Hong Kong 1.9
Peijia Medical, Ltd. Health Care China/Hong Kong 1.8
Crompton Greaves Consumer Electricals, Ltd. Consumer Discretionary India 1.7
Andes Technology Corp. Information Technology Taiwan 1.6
TOTAL 23.0

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
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 25.9 20.9 5.0
Health Care 15.5 10.1 5.4
Industrials 13.1 15.0 -1.9
Consumer Discretionary 8.8 12.0 -3.2
Real Estate 4.5 10.6 -6.1
Consumer Staples 4.3 4.7 -0.4
Financials 3.6 8.0 -4.4
Materials 1.0 10.4 -9.4
Communication Services 0.6 4.1 -3.5
Utilities 0.0 2.4 -2.4
Energy 0.0 1.7 -1.7
Cash and Other Assets, Less Liabilities 22.6 0.0 22.6

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

Country Fund Benchmark Difference
China/Hong Kong 37.1 19.5 17.6
India 15.7 17.6 -1.9
Taiwan 11.7 24.0 -12.3
South Korea 6.5 21.2 -14.7
Vietnam 1.6 0.0 1.6
Thailand 1.2 3.9 -2.7
Indonesia 1.1 2.4 -1.3
Philippines 1.1 1.0 0.1
Malaysia 0.8 3.8 -3.0
Singapore 0.6 6.1 -5.5
Pakistan 0.0 0.5 -0.5
Cash and Other Assets, Less Liabilities 22.6 0.0 22.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.1 0.0 0.1
Large Cap ($10B-$25B) 11.5 0.0 11.5
Mid Cap ($3B-$10B) 30.0 14.4 15.6
Small Cap (under $3B) 35.7 85.6 -49.9
Cash and Other Assets, Less Liabilities 22.6 0.0 22.6

The Fund defines Small Companies as companies with market capitalization generally between $100 million and $5 billion or the largest company included in the Fund’s primary benchmark. The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

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
(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

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Commentary

Period ended 31 December 2020

For the year ending 31 December 2020, the Matthews Asia Small Companies Fund returned 46.12%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned 26.60%. For the fourth quarter, the Fund returned 24.27%, while its benchmark returned 19.72%.

Market Environment:

Equities across Asia were volatile in the year, but broad market indexes tracking the region ultimately generated attractive returns. Global markets fell in the first quarter, as worries surrounding the spread of COVID-19 moved from China throughout Europe to the U.S. and then back to South Asia, including India. Fears of a global growth slowdown turned into reality as governments worldwide began to implement different versions of “shelter in place” to contain the movement of the virus. But central banks globally, led by the U.S. Federal Reserve, unleashed powerful, and largely effective, monetary stimulus. Many governments also unveiled meaningful fiscal stimulus. Both those actions helped ease worries about a crippling and sustained global recession. They also provided cover for many emerging markets (EM) to undertake their own monetary and fiscal stimuli thereby supporting their economies.

In the third quarter, economic recovery and improved sentiment began to take hold as major economies continued to relax COVID-19 lockdown restrictions even further. China’s V-shaped recovery in manufacturing along with a steady recovery in domestic consumption brought some normalcy to daily life. EM currencies rallied slightly against the U.S. dollar in the third quarter, acting as a slight tailwind for EM equities. Growth stocks outpaced value and small caps outperformed large caps. The fourth quarter saw further economic strengthening. Cyclical stocks in beaten-up or export-driven markets such as Indonesia and South Korea rallied most in the fourth quarter, while markets that experienced early recovery like China, Japan and India lagged slightly. Market strength gained momentum following the U.S. Presidential elections in November as markets hoped for less confrontational U.S. – China relations, combined with an announcement of several approved COVID-19 vaccines that were due for distribution early in 2021.

Performance Contributors and Detractors:

Stock selection in China/Hong Kong was a notable contributor to performance for the year. As the economic recovery continued to broaden in the year, small companies, especially in the health care and technology space, did well. On the other hand, stock selection and an underweight to South Korea was a detractor. South Korea’s broader markets, led by cyclical sectors such as materials, shipping and shipbuilding rallied late in the year on improving sentiment toward global exports and trade. Our underweight worked against us in this environment.

From a sector perspective, stock selection in information technology was a notable contributor. The expansion of China’s local supply chain development especially in areas such as semiconductors and industrial automation has aided stock performance. Smaller companies are well positioned to participate in this growth, bringing innovative new approaches to existing customer needs. On the other hand, stock selection in health care was a detractor, even though our overweight to the sector was a contributor. While our health care holdings generated attractive total returns in aggregate, they trailed the returns of the benchmark constituents within the sector. We continue to like the long-term prospects of our health care holdings.

Among indivdual stocks, Silergy Corp was a notable contributor. While listed in Taiwan, Silergy is a truly global company with an edge in China. The company designs mixed-signal and analog power management integrated circuits that are used in industrial, consumer, computing and communications. On the other hand, a detractor 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. 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:

During the fourth quarter we have initiated a new position in Formosa Sumco Technology Corporation, a Taiwanese semiconductor wafer manufacturing company. The company derives the majority of its revenues from 12-inch wafers while also having meaningful exposure to the 8-inch wafers. Its main customers include foundry and memory companies operating in Taiwan and China. The demand for wafers is expected to continue to recover in 2021 and beyond, providing support to top and bottom line growth. At the same time the industry is also consolidating, thereby potentially bringing in capacity addition and pricing discipline. We find the company reasonably valued.

We also initiated a position in Malaysian home improvement retailer Mr. DIY through the IPO process. Mr. DIY is the largest player in the industry with about 30% market share in an end market that is growing. The company’s value proposition is that it has an offering that is attractively priced at convenient locations in a store format that has a large number of items per store. The company continues to drive sales growth through both new store openings as well as by delivering good like-for-like sales growth, which translates into attractive profit growth driven by its efficient operations. Two new formats—the discount retail format, MR DOLLAR and value-for-money toy store, MR. TOY—offer further growth options.

Outlook:

Looking ahead, uncertainty remains in terms of the pace of Asia’s economic recovery. Given the uncertainty of how quickly vaccines can be distributed, how quickly daily patterns may return to normal remain unknown and the strength of the economic recovery in different markets where we invest may not be immediately evident. Valuations for Asia ex-Japan equities are above their historic averages and in some areas of the market, we believe investors have already priced in a high level of anticipated future growth. All of these emphasize the importance of investing with a long-term view.

At the same time, we see many reasons for optimism. There are three important drivers for equity prices—growth, valuation and liquidity. From a growth perspective, Asia is on a path to economic recovery and the sheer size of the consumer base in Asia works in its favor. Valuations for Asia ex-Japan equities rose in 2020, so there is less valuation support for the broader market, but we continue to see pockets of opportunity. Finally, turning to market liquidity, we find good liquidity across Asia. We believe the confluence of these drivers will support medium to long-term growth across many parts of Asia.

 

Rolling 12 Month Returns For the period ended 31/12/2020 - I (Acc)
Name 2020 2019 2018 2017 2016 Inception Date
Matthews Asia Small Companies Fund (USD)
46.12% 17.53% -14.53% 30.80% -1.09% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
26.60% 7.58% -18.63% 33.84% -2.05%
Matthews Asia Small Companies Fund (GBP)
41.22% 14.03% -9.84% 19.38% 18.87% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
22.69% 3.43% -13.57% 22.25% 16.83%

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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