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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

20.68%

YTD Return (USD)

(as of 16/09/2021)

$23.17

Price (USD)

(as of 16/09/2021)

$57.71 million

Fund Assets

(as of 31/08/2021)

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 $57.71 million (31/08/2021)
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 31/08/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-1.34% 6.66% 19.22% 48.64% 21.63% 16.58% n.a. 10.44% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
1.01% 2.26% 19.81% 41.67% 12.84% 10.83% n.a. 6.59%
Matthews Asia Small Companies Fund (GBP)
-0.19% 9.67% 18.10% 43.64% 19.22% 15.44% n.a. 14.09% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
2.04% 5.62% 19.00% 37.83% 10.71% 9.74% n.a. 10.27%
As of 30/06/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
4.24% 16.69% 16.51% 55.78% 18.84% 17.50% n.a. 10.36% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
2.49% 9.61% 20.08% 62.52% 12.75% 12.17% n.a. 6.76%
Matthews Asia Small Companies Fund (GBP)
6.59% 15.92% 14.77% 37.86% 16.75% 16.74% n.a. 13.99% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
5.46% 9.47% 18.82% 45.36% 11.06% 11.44% n.a. 10.50%
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 30/06/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
55.78% 14.42% -5.85% 16.52% 14.51% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
62.52% -4.46% -7.69% 6.91% 15.92%
Matthews Asia Small Companies Fund (GBP)
37.86% 18.39% -2.49% 14.96% 18.49% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
45.36% -1.59% -4.24% 5.18% 19.30%

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 31/08/2021)
Fund Benchmark
Number of Positions 65 1,565
Weighted Average Market Cap $5.0 billion $2.2 billion
Active Share 97.2 n.a.
P/E using FY1 estimates 25.8x 13.8x
P/E using FY2 estimates 20.3x 12.7x
Price/Cash Flow 23.3 8.7
Price/Book 4.1 1.6
Return On Equity 11.1 10.5
EPS Growth (3 Yr) 8.7% 3.1%

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 31/08/2021)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 7.6
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 6.0
Silergy Corp. Information Technology China/Hong Kong 5.4
Phoenix Mills, Ltd. Real Estate India 3.6
Ecopro BM Co., Ltd. Industrials South Korea 3.6
Hugel, Inc. Health Care South Korea 3.2
ASMedia Technology, Inc. Information Technology Taiwan 2.3
SITC International Holdings Co., Ltd. Industrials China/Hong Kong 2.3
Andes Technology Corp. Information Technology Taiwan 2.3
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 2.2
TOTAL 38.5

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 31/08/2021)
  • 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.

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 June 2021

For the first half of 2021, the Matthews Asia Small Companies Fund returned 16.51%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned 20.08%. For the quarter ending 30 June, the Fund returned 16.69%, while its benchmark returned 9.61%.

Market Environment:

From early February to early June, value stocks outperformed growth stocks in Asia ex Japan as investors expected the strong global economic rebound from last year’s COVID-related slowdown to drive profit growth in economic cycle-sensitive industries. This view was further reinforced by investors’ belief that the U.S. Fed would let inflation run ahead of its target for a period of time to enable a stronger economic recovery. This scenario was also very conducive to the outperformance of small-cap stocks in relation to large-cap stocks.

The industrials and materials sectors were among the best performing in the Asia ex Japan small cap space during the first half of the year, while the performance of the real estate sector lagged. Earlier trends moderated somewhat after the Federal Open Market Committee meeting in June, when the Fed signaled the potential for interest rate hikes sooner than expected, lowering the potential long-term growth overshoot from previous expectations. On a country basis, India and Taiwan outperformed, while the worst performing market was COVID-impacted Indonesia.

In terms of currencies, the Taiwanese dollar and Chinese renminbi appreciated the most during the first half of 2021. Meanwhile, the South Korean won and Thai baht experience significant depreciation.

Performance Contributors and Detractors:

For the first half of the year, South Korea and Malaysia were the biggest contributors to relative performance, while stock selection in Taiwan along with our overweight to Indonesia were notable detractors. From a sector perspective, industrials and health care contributed positively, while information technology and consumer discretionary stocks detracted relative to the benchmark.

Turning to individual securities, Chinese solar inverter manufacturer Ginlong Technologies Co. was the biggest contributor to absolute performance during the first half of the year. The company specializes in string inverters that are predominantly used in distributed solar panel applications globally. The fast growing underlying market for solar panel installations, potential for market share gains and market share growth in ground-mounted solar power stations have helped drive the stock price higher.

On the other hand, Indonesian stocks in general, and Bank Tabungan Negara in particular, were among the biggest detractors to performance during the quarter. Bank Tabungan Negara is an Indonesian market leader in mortgage lending and the company specializes in middle to low income borrowers. There is a persistent shortage of housing in Indonesia and that demand in conjunction with the under-penetration of mortgages offers strong growth prospects for the company. We believe the bank could potentially see a sequential improvement in profits driven by reduced credit losses this year. But the Indonesian market in general, and its banking sector in particular, has been negatively affected by the latest wave of COVID infections. We remain positive on the mid- to long-term growth prospects of Bank Tabungan Negara, driven by strong underlying demand, a rebounding property market, supportive government policies in the sector and the potential for the Bank to improve its operational efficiencies. The investment case is also supported by very attractive valuations.

Notable Portfolio Changes:

HEG Ltd., an Indian manufacturer and exporter of graphite electrodes used by global steel producers, was added to the portfolio in the second quarter. On the demand side, global steel production has rebounded from the lows of the COVID-19 pandemic and the prices have been strong. Global electric arc furnace utilization has gone up and, barring another external shock, will likely remain strong over the coming quarters given the strength of global recovery and increased infrastructure spending. China, the world’s largest steel exporter, is looking to reduce its steel production and exports—especially from heavily polluting units to reduce its carbon emissions, thereby potentially aiding stronger electric arc furnace utilization rates in the rest of the world. The graphite electrode supply from markets outside of China is very disciplined and within China the supply remains fairly well controlled too. In addition to favorable market dynamics, HEG’s expansion plan should further aid its growth, and the stock trades at a reasonable valuation.

Outlook:

Looking ahead, earnings growth, liquidity and valuations all appear broadly supportive of Asia’s equity markets. We expect strong corporate earnings across Asia in 2021 as the global recovery continues to expand despite sporadic COVID-19 outbreaks—especially in developing economies. Across the region we see sufficient liquidity—while we have not seen as much uptake in credit, any pick up in credit issuance, especially in South and South East Asia, should further support economic growth. We also see a return to normalcy, leading to better economic prospects for businesses. Many countries in Asia have progressed from recovery to expansion, while others like Indonesia are still getting back to pre-pandemic levels of activity.



Rolling 12 Month Returns For the period ended 30/06/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Small Companies Fund (USD)
55.78% 14.42% -5.85% 16.52% 14.51% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
62.52% -4.46% -7.69% 6.91% 15.92%
Matthews Asia Small Companies Fund (GBP)
37.86% 18.39% -2.49% 14.96% 18.49% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
45.36% -1.59% -4.24% 5.18% 19.30%

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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