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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

24.32%

YTD Return (USD)

(as of 30/11/2021)

$23.87

Price (USD)

(as of 30/11/2021)

$68.64 million

Fund Assets

(as of 31/10/2021)

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. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI All Country Asia ex Japan Small Cap Index.

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 $68.64 million (31/10/2021)
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 30/09/2021 1.15% ( USD ) 1.15% ( GBP ) 1.15% ( EUR )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/10/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
3.68% 2.11% 23.39% 51.08% 29.53% 17.34% n.a. 10.67% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
1.27% 0.81% 19.57% 42.88% 19.28% 11.08% n.a. 6.43%
Matthews Asia Small Companies Fund (GBP)
1.11% 3.30% 22.23% 42.14% 26.18% 14.42% n.a. 14.28% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-0.38% 2.25% 19.24% 34.77% 16.52% 8.53% n.a. 10.06%
As of 30/09/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-0.17% 2.15% 19.01% 47.90% 23.50% 16.04% n.a. 10.31% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-1.45% -1.68% 18.07% 41.35% 13.80% 10.23% n.a. 6.34%
Matthews Asia Small Companies Fund (GBP)
2.36% 5.32% 20.88% 41.02% 22.26% 15.18% n.a. 14.28% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
0.59% 0.74% 19.70% 35.53% 12.54% 9.41% n.a. 10.23%
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 30/09/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
47.90% 22.81% 3.71% 0.33% 11.33% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
41.35% 13.83% -8.40% -2.33% 13.03%
Matthews Asia Small Companies Fund (GBP)
41.02% 17.84% 9.98% 2.94% 7.76% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
35.53% 8.50% -3.06% 0.48% 9.44%

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 31/10/2021)
Fund Benchmark
Number of Positions 69 1,560
Weighted Average Market Cap $5.0 billion $2.2 billion
Active Share 96.8 n.a.
P/E using FY1 estimates 27.8x 13.5x
P/E using FY2 estimates 20.3x 12.5x
Price/Cash Flow 23.2 8.5
Price/Book 4.0 1.6
Return On Equity 11.0 10.2
EPS Growth (3 Yr) 7.4% 1.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 31/10/2021)
12.35%
Alpha
0.81
Beta
100.85%
Upside Capture
58.06%
Downside Capture
1.53
Sharpe Ratio
1.01
Information Ratio
10.19%
Tracking Error
74.21

Fund Risk Metrics are reflective of Class I USD ACC shares.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/10/2021)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 6.7
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 5.8
Silergy Corp. Information Technology China/Hong Kong 5.3
Ecopro BM Co., Ltd. Industrials South Korea 4.0
Phoenix Mills, Ltd. Real Estate India 3.3
Hugel, Inc. Health Care South Korea 3.3
Lemon Tree Hotels, Ltd. Consumer Discretionary India 2.7
Bandhan Bank, Ltd. Financials India 2.7
Andes Technology Corp. Information Technology Taiwan 2.7
Solus Advanced Materials Co., Ltd. Information Technology South Korea 2.6
TOTAL 39.1

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).

The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI All Country Asia ex Japan Small Cap Index.

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 29/07/2021)

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

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Commentary

Period ended 30 September 2021

For the quarter ending 30 September 2021, the Matthews Asia Small Companies Fund returned 2.15%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned -1.68%.

Market Environment:

The rally in Asia ex Japan small cap equities took a breather during the third quarter, after a strong first half performance. The specter of inflation driven by supply shortages (especially in semiconductors), shipping bottlenecks, higher energy prices, and the emergence of political and regulatory risks led to a tepid performance during the quarter. We also saw the first interest rate hike in the region (South Korea) since the pandemic, as the very accommodative post-COVID-19 monetary policy environments begin to normalize. Despite these headwinds, Asia ex Japan small cap stocks continued to outperform mega caps and large caps, which were disproportionately affected by the regulatory and political risks in countries such as China.

During the quarter China and South Korea were among the worst performing markets in the region, weighed down by a rise in perceived political and regulatory risks. China was also weak on the back of the Chinese government’s targeted regulatory action in sectors such as education, internet gaming, social media platforms, and ride hailing services. On the other hand India and Indonesia were the best performing markets during the quarter on normalizing COVID-19 case rates, improving vaccination rates and normalizing economic activity. The Indonesian rupiah and the Indian rupee were among the best performing Asiancurrencies during the quarter, while the Thai baht and Philippine peso were among the worst performers.

From a sector perspective, energy and materials were among the best performers, while the health care and consumer discretionary sectors were among the worst performers.

Performance Contributors and Detractors:

On a country basis, South Korea and India were the biggest contributors to relative performance during the third quarter, while Taiwan was the biggest detractor. Stock selection in China, South Korea and India contributed positively to relative performance, while our overweights to India and Indonesia also contributed positively. Our overweight to China was a significant detractor.

From a sector standpoint, stock selection in industrials and consumer discretionary were the biggest positive contributors, while health care and information technology stock selection were notable detractors to relative performance.

Looking at individual portfolio holdings, South Korea’s Ecopro BM Co., developer and manufacturer of  advanced materials such as high-nickel cathode materials used in electric vehicles, was among the positive contributors to performance during the quarter. The market was enthused about the progress the company has made in growing its order book for high-nickel cathodes on the back of their key customers expanding their footprint to new geographies in a fairly significant way.

On the other hand, Peijia Medical, a China-based heart and neurovascular device manufacturer, detracted from performance during the quarter, as investors worried about the potential negative effects on revenue from volume-based procurement tenders from the government. Peijia’s stock price also suffered from the general sell-off in health care-related names in China. The company continues to execute well on its product pipeline and had received approval for its second-generation TAVR (transcatheter aortic valve replacement) product. We take a favorable view of its product pipeline and its ability to actively commercialize its recently approved products.

Notable Portfolio Changes:

During the quarter we initiated a position in Bandhan Bank, a microfinance and small-ticket mortgage lender in India. Bandhan is a market leader in microfinance lending, a sector that has been negatively impacted by the mobility restrictions imposed during COVID-19 shutdowns as well as political risk during recent state elections in East India. We expect Bandhan’s operations and credit costs to normalize over time, as economic activity and mobility normalizes, especially in rural India. The company has an attractive deposit franchise and is actively diversifying from its core microlending business through both organic and inorganic growth initiatives. Bandhan has been actively adding to its senior leadership to increase depth within its ranks, is strongly capitalized, and trades at attractive valuations.

During the quarter we have trimmed some positions in names such as Wonik IPS Co. and Eugene Technology Co. after a strong run and redeployed capital elsewhere.

Outlook:

Looking ahead, earnings growth buoyed by strong cyclical recovery and valuations all appear supportive of Asia ex Japan small cap stocks. We expect strong corporate earnings in 2021 as the global recovery continues to expand. Across the region we see sufficient liquidity, and while we have not seen as much uptake in credit, any pick up in credit issuance should further support economic growth. COVID-19 vaccination programs are progressing well and provide hope for economic activity normalization in the coming quarters. Therefore, we believe small companies are poised for attractive growth, barring another devastating COVID-19 wave.

 

Rolling 12 Month Returns For the period ended 30/09/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
47.90% 22.81% 3.71% 0.33% 11.33% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
41.35% 13.83% -8.40% -2.33% 13.03%
Matthews Asia Small Companies Fund (GBP)
41.02% 17.84% 9.98% 2.94% 7.76% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
35.53% 8.50% -3.06% 0.48% 9.44%

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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