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
A focus on Asia—and providing compelling investment solutions for our clients—is what we believe distinguishes us among investment managers. Our insights into investment opportunities and risks are backed by proprietary research, a collaborative culture and 30 years of experience.
31/01/2013
Inception Date
-12.60%
YTD Return (USD)
(as of 28/06/2022)
$19.42
Price (USD)
(as of 28/06/2022)
$15.82 million
Fund Assets
(as of 31/05/2022)
Seeks total return with an emphasis on providing current income.
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.
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, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. Investing in Chinese securities involve risks. Heightened risks related to the regulatory environment and the potential actions by the Chinese government could negatively impact performance. 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.
These and other risks associated with investing in the Fund can be found in the prospectus.
Inception Date | 31/01/2013 | |
Fund Assets | $15.82 million (31/05/2022) | |
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 |
Management Fee | 0.75% | |
Total Expense Ratio As of 31/03/2022 | 1.00% ( USD ) |
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, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. Investing in Chinese securities involve risks. Heightened risks related to the regulatory environment and the potential actions by the Chinese government could negatively impact performance. 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 |
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.
Dividend Yield | 3.24% |
Source: FactSet Research Systems, Bloomberg, Matthews Asia
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Class I USD ACC shares.
Sources: Zephyr StyleADVISOR
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
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
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.
Lead Manager
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews Asia and manages the firm’s China Dividend Strategy and co-manages the Asia Dividend, Asia ex Japan Dividend and China Strategies. Prior to joining Matthews Asia in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Co-Manager
Portfolio Manager
Yu Zhang is a Portfolio Manager at Matthews Asia and manages the firm's Asia Dividend and Asia ex Japan Dividend Strategies, and co-manages the China Dividend Strategy. Prior to joining Matthews Asia in 2007 as a Research Associate, Yu was an Analyst researching Japanese companies at Aperta Asset Management from 2005 to 2007. Before receiving a graduate degree in the U.S., he was an Associate in the Ningbo, China office of Mitsui & Co., a Japanese general trading firm. Yu received a B.A. in English Language from the Beijing Foreign Studies University, an MBA from Suffolk University and an M.S. in Finance from Boston College. He is fluent in Mandarin.
Co-Manager
Portfolio Manager
S. Joyce Li is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Dividend Strategy and co-manages the Asia ex Japan Dividend and China Dividend Strategies. Prior to joining the firm in 2016, she was a Portfolio Manager and Principal at Marvin & Palmer Associates, where she co-managed equity investments in the Asia Pacific markets between 2007 and 2016. Joyce started her investment career as a Senior Investment Associate at Wilmington Trust. Joyce received an MBA with honors from the Wharton School of the University of Pennsylvania and a M.S. in Computer Science from the University of Virginia. She is fluent in Mandarin and Cantonese.
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.
The Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
Commentary
Period ended 31 March 2022
For the quarter ending 31 March 2022, the Matthews China Dividend Fund returned -15.53%, while its benchmark, the MSCI China Index, returned -14.19%.
Market Environment:
Chinese equities fell sharply during the first quarter of 2022, as multiple negative impacts created significant market headwinds. The first shock was the Russian invasion of Ukraine, and the severe economic sanctions imposed on Russia by the West which caused the halting of trading of Russian equities. Many emerging markets funds with Russian equities exposure were forced to raise liquidity to cover the resulting losses and redemptions. Since Chinese equities are the most liquid assets in the emerging markets, they suffered a heavy sell off. Additionally, as Russia and China had recently jointly announced that their mutual cooperation “has no limit,” market participants worried that China’s supportive position toward Russia may result in damaging “secondary sanctions” from the West, dampening global investors’ sentiment towards Chinese equities.
The second shock was China’s continued implementation of its zero-COVID policy. As COVID cases started to increase in Jilin Province and Shanghai, government officials resorted to locking down the entire city. Locking down Shanghai—a business and financial hub of China—results in not only the loss of economic activity within the city itself but also impacts the production and logistic chain in other parts of China as well, making it look increasingly unlikely that China will be able to achieve the GDP growth target it set earlier this year. An additional shock this quarter stems from an increasingly hawkish U.S. Federal Reserve. Responding to sustained inflation pressures, the Fed has increased the number and magnitude of its forecast rate increases. This has resulted in a stronger U.S. dollar and soaring interest rates during the quarter, a combination that is typically negative for emerging markets equities.
Performance Contributors and Detractors:
On a sector basis, stock selection within the consumer discretionary and energy sectors were the largest detractors from relative Fund performance. Our stock selection within the information technology and communication services sectors were the largest contributors to relative performance.
Turning to individual holdings, E Ink, a global leader of ePaper technology firm based in Taiwan, was the top performance contributor to absolute performance during the quarter. The company continued to forecast strong revenue potential, lifting sentiment for the stock. Postal Savings Bank of China was the second largest performance contributor for the quarter, as the bank reported robust earnings growth for 2021, making it one of the fastest earnings growers among large Chinese banks. Additionally, the bank’s operating costs may soon decline, as it seeks to renegotiate the agency fee it is paying to its parent company, China Postal Group.
On the other hand, China Education Group, which operates for-profit colleges, was the largest detractor to absolute performance. During the quarter, there was an unverified “official” document circulating among investors that the Chinese government will target private higher education institutions for tighter regulation, causing some panic selling of the stock. After talking to both company management and other industry sources, we believe the document is forged, and see the potential for operation resilience, especially during the economic down turn. Leading internet platform company Tencent was the second largest absolute performance detractor for the quarter, as investors continued to worry about the industry’s substantial regulatory pressures. The recent stall of new online game licenses on its platform also limits the company’s earning growth near term.
Notable Portfolio Changes:
During the quarter we added fast-food chain operator Yum China Holdings and reinitiated a position in China Tourism Group Duty Free. We believe these two companies are well positioned for a domestic tourism recovery, and will ultimately gain market share from their ailing competitors. We also took the opportunity of a biotech/health care sector sell-off to add a position in leading pharmaceutical contract manufacturer Asymchem Laboratories Tianjing. Asymchem’s strong expertise in its small molecule process has helped it win a large contract with a leading global drug company to make drugs targeting the COVID-19 virus.
We exited e-commerce giant Alibaba Group, as the dual headwinds of slower consumer spending and regulatory uncertainty persist for the company. We also sold Tsingtao Beer to fund other investments, as we are concerned the company’s margin improvement may stall this year, with its recent reported strong earnings growth fueled by unsustainable large, one-off government subsidies. Additionally, we exited diesel engine manufacturer Weichai Power Co., as its product cycle looks to have peaked and we are disappointed with the lack of progress of company’s corporate governance improvement.
Outlook:
Looking ahead, we are optimistic that the headwinds that precipitated Chinese equities’ sell off in 2021 will recede. So far in 2022, we have not seen new internet regulations, and various local municipal governments are relaxing home purchase restrictions. We are also seeing some concrete progress being made on the auditing issue raised by the SEC to Chinese securities regulators. And finally we believe there will be some relaxation of travel restrictions later this year, despite the current strict lock down in Shanghai.
Rolling 12 Month Returns For the period ended 31/03/2022 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg