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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

5.96%

YTD Return (USD)

(as of 06/05/2021)

$23.47

Price (USD)

(as of 06/05/2021)

$19.15 million

Fund Assets

(as of 31/03/2021)

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 $19.15 million (31/03/2021)
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 30/04/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund (USD)
5.20% 3.66% 6.00% 38.53% 9.84% 14.83% n.a. 10.91% 31/01/2013
MSCI China Index (USD)
1.40% -5.96% 0.97% 37.16% 8.92% 16.66% n.a. 9.09%
As of 31/03/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund (USD)
-0.45% 0.77% 0.77% 43.26% 8.61% 14.08% n.a. 10.34% 31/01/2013
MSCI China Index (USD)
-6.29% -0.43% -0.43% 43.81% 8.41% 16.29% n.a. 9.01%
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 31/03/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews China Dividend Fund (USD)
43.26% -13.54% 3.44% 28.18% 17.66% 31/01/2013
MSCI China Index (USD)
43.81% -5.66% -6.08% 39.15% 19.93%

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 31/03/2021)
2.59% Dividend Yield

Source: FactSet Research Systems, Bloomberg, Matthews

Portfolio Characteristics

(as of 31/03/2021)
46
Number of Securities

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

13.4x
P/E using FY1 estimates
11.5x
P/E using FY2 estimates
$82.6 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 30/04/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 7.6
SITC International Holdings Co., Ltd. Industrials 3.5
China Education Group Holdings, Ltd. Consumer Discretionary 3.3
Shanghai Baosight Software Co., Ltd. Information Technology 3.3
Shimao Services Holdings, Ltd. Real Estate 3.0
China Suntien Green Energy Corp., Ltd. Energy 2.8
Alibaba Group Holding, Ltd. Consumer Discretionary 2.7
CITIC Telecom International Holdings, Ltd. Communication Services 2.7
Postal Savings Bank of China Co., Ltd. Financials 2.6
Pharmaron Beijing Co., Ltd. Health Care 2.4
TOTAL 33.9

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 31/03/2021)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Communication Services 17.1 20.5 -3.4
Consumer Discretionary 16.6 33.9 -17.3
Industrials 11.4 4.7 6.7
Financials 10.7 14.5 -3.8
Consumer Staples 9.9 4.4 5.5
Information Technology 9.6 6.0 3.6
Real Estate 6.8 4.0 2.8
Health Care 4.7 6.7 -2.0
Materials 4.4 2.2 2.2
Energy 3.1 1.2 1.9
Utilities 2.4 2.0 0.4
Cash and Other Assets, Less Liabilities 3.2 0.0 3.2

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 96.8
Cash and Other Assets, Less Liabilities 3.2
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 25.2 73.5 -48.3
Large Cap ($10B-$25B) 12.8 15.5 -2.7
Mid Cap ($3B-$10B) 36.1 10.5 25.6
Small Cap (under $3B) 22.8 0.5 22.3
Cash and Other Assets, Less Liabilities 3.2 0.0 3.2
China Exposure Portfolio Weight
SAR (Hong Kong) 50.1
H Shares 16.1
A Shares 9.3
B Shares 7.7
China-affiliated corporations (CAC) 6.2
Overseas Listed Companies (OL) 4.2
Unassigned 3.2
Cash and Other Assets, Less Liabilities 3.2

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 ©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

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 31 March 2021

For the quarter ending 31 March 2021, the Matthews China Dividend Fund returned 0.77%, while its benchmark, the MSCI China Index, returned -0.43%.

Market Environment:

Chinese equity markets were volatile during the first quarter. While stock prices rose early in the quarter, broad-market gains in the benchmarks were erased by quarter end. Firstly, the Chinese central bank started to tighten mortgage regulations in certain regions where real estate price have gone up too fast, and also began examining small business loans that have been misused for property speculation. The hope for a global recovery also started to turn to worry with the possibility of an early ending of global monetary loosening, given the sharp increase of U.S. Treasury yield.

On the geopolitical front, the first high level meeting of senior diplomats from the new Biden administration and their Chinese counterparts turned into a public quarrel. And investors were reminded that U.S. securities regulators will enact to delist Chinese companies that do not comply with American auditing standards for three years in a row. The Hong Kong market was also spooked by the news that the Hong Kong government will raise the stamp duty tax on shares traded on Hong Kong stock exchanges to raise fiscal revenue. Finally, on the last few trading days of the quarter, news broke that a mysterious family office in New York which heavily invested in many Chinese companies went bust, and its prime brokers were liquidating some of those shares in rapid fire sale. This further dampened market sentiment, especially for the high-flying Chinese growth stocks.

Performance Contributors and Detractors:

SITC International, a leading intra-region container shipping company was a contributor in the quarter. The strong performance was due to stronger-than-expected annual results announced in early March. Baioo Family Interactive, a mobile game developer, was also a notable contributor. Baioo announced in February that Tencent Holdings, the leading game publisher in China, made a minority investment in the company. Markets welcomed this news, viewing it as an endorsement on Baioo’s quality that suggests future cooperation.

On the other hand, XD Inc., another mobile game developer, was a detractor. XD has heavily invested in its mobile gamer community platform, thus the loss in that segment in 2020 surprised the market. We believe the gamer community is a unique asset for XD, which allows gamers and game publishers to by-pass the commission taken by middle men and app stores. Minth Group was another detractor as the stock was negatively impacted by the news that the separate listing of its battery-hosting business could be cancelled due to regulation changes. However, we believe this does not impact the company’s business fundamentals.

Notable Portfolio Changes:

During the quarter, we initiated a position in Haier Smart Home listed in Germany’s stock exchange at a significant discount to the company’s A and H shares listed in Shanghai and Hong Kong. Haier Smart Home mainly engages in the research, development, production and sales of smart home appliances and we like the company’s diverse market exposure, especially its significant presence in the U.S. market. We believe Haier could be taking market share with its own manufacturing capacity acquired from General Electronics a few years ago. In addition, we have initiated position in two consumer staples stocks, Uni-President China Holdings which manufactures beverages and instant noodles and Jiajiayue Group, a super market chain operator. Uni-President China’s beverage sales were negatively impacted last year due to restricted travelling and outdoor activities due to COVID but we believe its sales should recover this year. We also think the company’s growth in self-heating rice category will supplement its slow growing instant noodle business over the longer term. Jiajiayue Group and other super market retailers’ shares were significantly de-rated by the market due to concerns of competition from community-based group buying apps. However, we believe Jiajiayue, with its efficient supply chain and comprehensive offering such as cooked meals, is well poised to compete and survive in this challenging market.

We have taken profit and exited our positions from Gree Electric Appliances, China International Capital Corporation, Accton Technology and JD Health International, and deploy capital somewhere else.

Outlook:

We remain optimistic about both the near-term and long-term growth prospects in China. In the near term, Chinese equities market and its economy may decouple as Chinese equities have run ahead of fundamentals with ample global liquidity. Keeping the coronavirus under control is key to maintaining China’s V-shaped economic recovery. While the global economy starts to recover with the help of COVID vaccines and interest rates begin to normalize, Chinese equities may correct from high growth expectation and present good opportunities for long-term investors.

Over the long term, we expect that China’s growth will continue to be driven by growing domestic consumption. The depth and diversity of the opportunity set in China continues to expand, with a notable uptick in IPOs over the past 12 months. Key themes that we are following include technology upgrades, health and wellness trends, services that enhance quality of life and premium consumer goods. The team continues to look for attractive long-term growth opportunities driven by the Chinese consumer.



Rolling 12 Month Returns For the period ended 31/03/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews China Dividend Fund (USD)
43.26% -13.54% 3.44% 28.18% 17.66% 31/01/2013
MSCI China Index (USD)
43.81% -5.66% -6.08% 39.15% 19.93%

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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