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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

15.00%

YTD Return (USD)

(as of 24/06/2021)

$22.08

Price (USD)

(as of 24/06/2021)

$50.87 million

Fund Assets

(as of 31/05/2021)

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 $50.87 million (31/05/2021)
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 31/03/2021 1.24% ( USD ) 1.24% ( GBP ) 1.15% ( EUR )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/05/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
5.30% 6.45% 11.77% 67.53% 15.74% 16.71% n.a. 9.91% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
1.13% 8.27% 17.16% 72.25% 9.25% 11.93% n.a. 6.50%
Matthews Asia Small Companies Fund (GBP)
3.27% 4.72% 7.68% 46.04% 13.43% 17.45% n.a. 13.14% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-1.50% 6.49% 12.67% 49.81% 6.87% 12.46% n.a. 9.80%
As of 31/03/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-4.91% -0.16% -0.16% 78.66% 12.59% 14.04% n.a. 8.57% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
1.24% 9.56% 9.56% 87.24% 6.84% 10.09% n.a. 5.75%
Matthews Asia Small Companies Fund (GBP)
-3.71% -0.99% -0.99% 60.25% 13.40% 15.05% n.a. 12.11% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
2.59% 8.54% 8.54% 68.28% 7.44% 10.99% n.a. 9.46%
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 31/03/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
78.66% -12.26% -8.94% 21.76% 10.97% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
87.24% -26.57% -11.29% 18.13% 12.22%
Matthews Asia Small Companies Fund (GBP)
60.25% -7.03% -2.12% 8.00% 27.97% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
68.28% -22.84% -4.50% 5.30% 28.99%

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 31/05/2021)
65
Number of Securities

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

24.4x
P/E using FY1 estimates
19.0x
P/E using FY2 estimates
$4.7 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 31/05/2021)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 5.9
Silergy Corp. Information Technology China/Hong Kong 5.8
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.6
Phoenix Mills, Ltd. Real Estate India 3.5
Hugel, Inc. Health Care South Korea 3.2
Lemon Tree Hotels, Ltd. Consumer Discretionary India 2.6
Innovent Biologics, Inc. Health Care China/Hong Kong 2.6
Peijia Medical, Ltd. Health Care China/Hong Kong 2.3
Airtac International Group Industrials China/Hong Kong 2.2
Marico, Ltd. Consumer Staples India 2.1
TOTAL 33.8

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 31/05/2021)
  • 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).

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 22/01/2021)

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

Overall Morningstar RatingTM is reflective of the noted share class. Fund ratings represent an opinion only and are not a recommendation to buy or sell any fund. Copyright ©2021 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

Robert  Harvey, CFA photo
Robert Harvey, CFA

Co-Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Commentary

Period ended 31 March 2021

For the quarter ending 31 March 2021, the Matthews Asia Small Companies Fund returned -0.16%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned 9.56%.

Market Environment:

As the global economic recovery continued to broaden out, Asia small caps rallied in the quarter, outperforming their large-cap counterparts. India, China and Thailand led equity price gains among small companies in the region as investors sought buying opportunities among more cyclically sensitive industries, amid prospects for a faster-than-expected return to growth. Elsewhere, equity prices in Indonesia and the Philippines dipped slightly as investors feared a slower recovery due to the continued fallout from COVID-19 pandemic that is still not fully under control.

The market saw a very strong intra-quarter rotation from growth-oriented stocks to more value-oriented and economically sensitive stocks globally in February as the U.S. Treasury yields rose. The real yields also rose as the market started to factor in a strong U.S. economic recovery due to Biden administration’s additional fiscal stimulus measures worth US$1.9 trillion and expectations around a future infrastructure spending plan. Against this backdrop, Asian currencies were mixed in the quarter, with the Indian rupee (-0.06%) and the Chinese renminbi (-0.23%) roughly flat with the U.S. dollar. The South Korean won (-4.02%) and Indonesian rupiah (-3.27%) experiencing more notable drops.

Performance Contributors and Detractors:

Overall, our exposure to growth names in China hurt our relative performance during the quarter. Many of the stocks that had done well during the previous year had given up some of those gains including in areas such as technology, health care and solar supply chain. Some of the fast growing consumer staples names also retraced.

Flat glass, a leading solar glass maker in China, detracted from performance during the quarter. As the prices rose sharply late last year and stayed strong, industry players made additional capacity announcements and there was also increased supply of non-solar glass to be used as a substitute of solar glass. We have always expected the pricing to normalize and Flat glass continues to execute well and is rapidly expanding its capacity over the coming quarters. We expect it to continue to benefit from the long-term demand and attractive margin profile in future driven by its scale and operational excellence. Other detractors included consumer staples like Yantai China pet foods and Sichuan Teway food group as investors rotated towards companies with weaker balance sheets and profitability metrics but that could potentially benefit from broader economic recovery.

Turning to contributors, Shriram City Union in India, an Indian non-banking financial company, was a notable contributor with its better than expected credit cost performance, very strong capital ratios and a strong franchise in its niches. Prospects for improved profits led by normalizing credit costs on 2021 after a pandemic struck 2020, and the potential for loan growth pick up as economic activity normalizes have benefitted the company.

SITC International Holdings, an intra-Asia, shipping specialist contributed positively as shipping rates globally went up; and it saw strong demand trend for its key routes connecting North and South East Asia as economic activity rebounded.

Notable Portfolio Changes:

During the quarter we added to Bank Tabungan Negara, an Indonesian mortgage lender. Bank Tabungan  is a leader in the lower-income mortgage lending. After a six-year downturn in the Indonesian property market, conditions are looking conducive to a rebound driven by pent up demand, very favorable regulatory changes, lower rates, better affordability and prospects of strong recovery post-COVID. We believe the company is well positioned to benefit from those trends and also from strong recovery in profitability driven by credit cost normalization. We also exited some small positions such as Kangji Medical as we found more attractive investment opportunities elsewhere and consolidated our holdings.

Outlook:

Looking ahead, earnings growth, liquidity and valuations all appear supportive of Asia’s equity markets. We expect strong corporate earnings across Asia in 2021 as the global recovery continues to expand. Across the region we see sufficient liquidity. While we have not seen as much uptake in credit, any pick up in credit issuance should further support economic growth. Across the region, we see a return to normalcy, leading to better economic prospects for businesses. Parts of Asia have progressed from recovery to expansion, while others like India and Indonesia are still getting back to pre-pandemic levels of activity. Some of the economic indicators in India are pointing to a steady improvement but we await confirmation of the trend in stronger credit activity. We believe small companies are poised for attractive growth as economies continue their gradual reopening process.

Rolling 12 Month Returns For the period ended 31/03/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
78.66% -12.26% -8.94% 21.76% 10.97% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
87.24% -26.57% -11.29% 18.13% 12.22%
Matthews Asia Small Companies Fund (GBP)
60.25% -7.03% -2.12% 8.00% 27.97% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
68.28% -22.84% -4.50% 5.30% 28.99%

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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