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Asia Growth & Income

Matthews China Dividend Fund

Snapshot
  • Total return strategy seeks to access the growth of China with lower volatility
  • Unconstrained all-cap portfolio with a quality bias
  • Flexible approach offers participation in both growth and value markets

31/01/2013

Inception Date

5.87%

YTD Return (USD)

(as of 26/01/2021)

$23.45

Price (USD)

(as of 26/01/2021)

$19.17 million

Fund Assets

(as of 31/12/2020)

Objective

Seeks total return with an emphasis on providing current income.

Strategy

The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total assets, in income-paying publicly traded common stocks, preferred stocks, convertible preferred stocks, and other equity-related instruments of companies located in China. For 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. The Fund may also invest in convertible fixed-income securities.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends. 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 31/01/2013
Fund Assets $19.17 million (31/12/2020)
Base Currency USD
ISIN: LU0871673488 (USD)
Bloomberg Symbol MATACDI:LX (USD)
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 )

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 China Dividend Fund (USD)
6.18% 12.15% 24.30% 24.30% 8.52% 13.36% n.a. 10.57% 31/01/2013
MSCI China Index (USD)
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% n.a. 9.36%
As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund (USD)
6.18% 12.15% 24.30% 24.30% 8.52% 13.36% n.a. 10.57% 31/01/2013
MSCI China Index (USD)
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% n.a. 9.36%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014
Matthews China Dividend Fund (USD)
24.30% 14.82% -10.44% 38.09% 6.09% 7.94% 0.92%
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26%
For the period ended 31/12/2020
Name 2020 2019 2018 2017 2016 Inception Date
Matthews China Dividend Fund (USD)
24.30% 14.82% -10.44% 38.09% 6.09% 31/01/2013
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11%

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.

Yield

(as of 31/12/2020)
2.73% Dividend Yield

Source: FactSet Research Systems, Bloomberg, Matthews

Portfolio Characteristics

(as of 31/12/2020)
47
Number of Securities

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

15.5x
P/E using FY1 estimates
12.8x
P/E using FY2 estimates
$68.2 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 7.4
Shanghai Baosight Software Co., Ltd. Information Technology 4.0
SITC International Holdings Co., Ltd. Industrials 4.0
Tsingtao Brewery Co., Ltd. Consumer Staples 3.5
Minth Group, Ltd. Consumer Discretionary 3.4
China International Capital Corp., Ltd. Financials 3.1
Postal Savings Bank Of China Co., Ltd. Financials 3.1
Gree Electric Appliances, Inc. of Zhuhai Consumer Discretionary 2.8
MediaTek, Inc. Information Technology 2.8
Leader Harmonious Drive Systems Co., Ltd. Industrials 2.7
TOTAL 36.8

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
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 21.1 35.2 -14.1
Communication Services 15.0 20.1 -5.1
Industrials 14.2 4.5 9.7
Financials 10.7 13.5 -2.8
Information Technology 10.1 6.7 3.4
Consumer Staples 6.5 4.5 2.0
Real Estate 6.0 3.6 2.4
Health Care 4.8 6.5 -1.7
Materials 4.8 2.1 2.7
Energy 2.6 1.6 1.0
Utilities 2.1 1.8 0.3
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9

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

Asset Type Fund
Common Equities and ADRs 98.1
Cash and Other Assets, Less Liabilities 1.9
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 24.1 73.9 -49.8
Large Cap ($10B-$25B) 15.6 16.0 -0.4
Mid Cap ($3B-$10B) 35.4 9.2 26.2
Small Cap (under $3B) 23.0 1.0 22.0
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9
China Exposure Portfolio Weight
SAR (Hong Kong) 45.9
H Shares 21.1
A Shares 9.8
B Shares 9.8
China-affiliated corporations (CAC) 4.1
Overseas Listed Companies (OL) 1.4
Unassigned 6.0
Cash and Other Assets, Less Liabilities 1.9

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

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

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Yu  Zhang, CFA photo
Yu Zhang, CFA

Co-Manager

S. Joyce Li, CFA photo
S. Joyce Li, CFA

Co-Manager

Commentary

Period ended 30 September 2020

For the quarter ending 30 September, 2020, the Matthews China Dividend Fund returned 7.28%, while its benchmark, the MSCI China Index, returned 12.57%.

Market Environment:

Chinese equities went through another volatile quarter in terms of political tension. U.S. – China tension escalated to a new height in July when the U.S. ordered China to close its consulate in Houston, and in retaliation, China ordered the closure of the U.S. consulate in Chengdu. Additionally, in early August, President Trump signed an executive order to ban popular apps Tiktok and WeChat in the U.S. on national security concern. However, due to the vague wording in the executive order, it was not clear how the ban would be implemented and how wide of an impact it would have on Tencent, which developed WeChat, creating stock price volatility.

The Chinese renminbi, along with other major currencies, strengthened against the U.S dollar during the quarter as the market priced in the risk of a prolonged shut down of the U.S. economy caused by COVID-19 and unlimited quantitative easing by the U.S. Federal Reserve.

Performance Contributors and Detractors:

During the third quarter, Shanghai Baosight Software was the top contributor to the Fund’s performance. The industrial software developer/data center operator reported 67% earnings growth for the second quarter as its new data center is put into operation. Auto parts supplier Minth Group rose as it further enters the supply chain for electric vehicles via its battery housing business and was the Fund’s second largest contributor to performance. The Fund’s third largest contributor was Powerlong Commerical Management, a shopping center property manager focused on lower tier cities in China.

On the other hand, a few names that performed well during the first half of the year became the largest performance detractors during this quarter due to profit taking. Sun Art Retail Group, the largest hyper market operator in China was the largest performance detractor, as markets started to worry that Chinese consumers will slow their spending. It is also facing emerging competition for grocery delivery from delivery platforms. Livzon Pharmaceutical Group also declined during the quarter due to profit taking. Additionally, the Fund’s significant underweight allocation and stock selection in the consumer discretionary sector detracted from performance. This is partly due to Alibaba Group’s outsized weight in the benchmark index and stellar performance during the quarter which the Fund does not own.

Notable Portfolio Changes:

During the quarter, we initiated positions in two A-share companies newly listed this year: Bafang Electric Suzhou and Leader Harmonious Drive System. Bafang manufactures components in electric bicycles, which is increasingly gaining popularity globally. Leader Harmonious Drive System is a maker of precision transmissions used in industrial robots. We believe both companies have high potential to rival their global competitors in their niche areas. In addition, we participated in two IPOs in the for-profit education industry: Cathay Media and Education and Neusoft Education Technology. Both companies are focused on niche academic fields such as media/performance and information technology.

We took profits from convenience store chain Chengu Hongqi and exited our position in the company but we will continue to monitor the company and its first foray outside of its home province. We also exited Sunevision Holdings, Hong Kong’s largest data center operator, given the increasing likelihood global internet companies may forego Hong Kong as a location to host their data due to concern over National Security Law implemented this year.

Outlook:

Chinese manufacturing data points to a continued V-shaped recovery, and retail sales data registered positive year- over-year growth during September. During the October 1st National Day golden week holiday, it is reported that half a billion Chinese consumers started vacationing domestically, and the packed tourist spots served as reminder of China’s consumer spending power outside of China before COVID-19. Thus, we believe domestic consumption still has ample room of growth in China.

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 and we continue to seek and invest in attractive dividend-paying stocks with improv

Rolling 12 Month Returns For the period ended 31/12/2020 - I (Acc)
Name 2020 2019 2018 2017 2016 Inception Date
Matthews China Dividend Fund (USD)
24.30% 14.82% -10.44% 38.09% 6.09% 31/01/2013
MSCI China Index (USD)
29.67% 23.66% -18.75% 54.33% 1.11%

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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