TOP
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

2.03%

YTD Return (USD)

(as of 14/04/2021)

$22.60

Price (USD)

(as of 14/04/2021)

$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
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
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%
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 31/03/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 8.7
SITC International Holdings Co., Ltd. Industrials 3.8
Shanghai Baosight Software Co., Ltd. Information Technology 3.3
Postal Savings Bank of China Co., Ltd. Financials 3.2
MediaTek, Inc. Information Technology 3.2
China Suntien Green Energy Corp., Ltd. Energy 3.1
CITIC Telecom International Holdings, Ltd. Communication Services 2.8
China Education Group Holdings, Ltd. Consumer Discretionary 2.6
Shimao Services Holdings, Ltd. Real Estate 2.6
Huaxin Cement Co., Ltd. Materials 2.5
TOTAL 35.8

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 31/03/2021)
  • 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 December 2020

For the year ending 31 December 2020, the Matthews China Dividend Fund returned 24.30%, while its benchmark, the MSCI China Index, returned 29.67%. For the quarter ending 31 December 2020, the Matthews China Dividend Fund returned 12.15%, while its benchmark, the MSCI China Index, returned 11.21%.

Market Environment:

Following some early missteps in addressing the pandemic, Chinese authorities acted decisively, limiting internal travel and controlling its borders while working with world health organizations to control the outbreak. In addition, policy actions meant to assist small and medium-size enterprises were implemented including an increase in loan quotas, lowering of borrowing rates, a delay in loan repayments and value added tax (VAT) relief. The result was an early 2020 outperformance of Chinese equities which added support to neighboring country markets.

The second quarter of 2020 was lackluster even though anecdotes from our local offices and official economic data implied that recovery was well under way, however, the uncertainty around the national security law in Hong Kong has shadowed the performance of Chinese equities, especially the market in Hong Kong.

Chinese equities posted strong returns in the third quarter but most of those gains were registered in the first two weeks of the quarter—reflecting increased tensions between the U.S. and China. Nevertheless, consumer discretionary stocks (autos, travel and retail) were the strongest performers due to economic data pointing to a full recovery underway. Chinese equities were strong going into the last quarter of 2020, however, the surprising cancellation of Ant Financial’s IPO caused investors to worry about China’s regulatory risk towards giant internet companies, causing overall sentiment to wane somewhat.

Performance Contributors and Detractors:

For the full year of 2020, the Fund’s underweight in the financials sector and security selection in the real estate sector contributed the most to performance. On the other hand, security selection in communication services and consumer staple sectors detracted from Fund performance. Our total-return investment approach provides the flexibility of investing in both dividend-paying stocks and dividend growth stocks. To achieve a balance between dividend growth and current high yield, we maintained certain high dividend yield stocks such as telecom operators. However, these names are likely to underperform during a rally driven by ample global liquidity.

During the fourth quarter, SITC International Holding, a shipping company with focus on intra-Asia routes, was a contributor to Fund performance. Container shipping rates rose rapidly around the Christmas shopping season which benefited the company. We believe SITC is also well positioned to benefit from regional trade among Asian countries boosted by the Regional Comprehensive Economic Program (RCEP). Another contributor was Leader Harmonious Drive Systems, the precision parts company we added during the third quarter, as the market started to realize the company’s competence on the global stage. Cathay Media and Education Group was also a contributor, as it completed an acquisition of an after school tutoring service company, further expanding its art and performance education business into a bigger potential market.

On the contrary, medical equipment maker AK Medical was a detractor during the quarter, as the market worried that the centralized procurement of AK Medical’s products could depress its margin. We are closely monitoring the situation. Shimao Services Holding, a residential property manager, was another performance detractor. We participated in the company’s IPO due to its reputation of quality service. However, in a relatively short period of time, the market was flooded with many property managers’ IPO, and when negative news about its parent company’s bad acquisition emerged, Shimao’s shares sold off. In our view, this has very little impact on the company’s own operation, thus, we added to our position during the market selloff. HKBN, the broadband operator in Hong Kong, was also a detractor during the quarter. The company reported dismal outlook as its customers have been significantly impacted by COVID-19. However, we are still confident in HKBN’s management to maintain its growth longer term.

Notable Portfolio Changes:

During the fourth quarter, we re-initiated positions in Postal Saving Bank of China.  As China’s economy stabilizes further, we believe the asset quality of the banking sector should also improve. We also initiated a position in Travelsky Technology, the dominant airfare ticketing agency in China. Although its earnings had been impacted by bad debt incurred by one of its customers (a troubled airliner in financial distress), we believe it is largely a one-off situation and should not impact its fundamentals. As Chinese and global air travel could improve further into 2021, we think TravelSky should be well positioned to ride the recovery.

In addition, we rotated capital from Zhong Sheng Group to China Yongda Auto. As the valuation gap between these two companies widens, we think there is more upside potential for Yongda Auto to catch up as the market may be late to recognize its improvements in operations. We also exited our position in China Tower as we were concerned that it could be impacted by Donald Trump’s executive order to exclude Chinese companies with a military link, as the largest shareholders of China Tower are China Mobile, China Telecom and China Unicom. We also exited KWG Group as we viewed the company’s further upside was limited going forward after it spun off its property service arm.

Outlook:

Unlike many developed economies’ unlimited quantitative monetary easing policy, China’s monetary aggregates have been balanced for several months, offering Chinese policymakers a future cushion to stimulate the economy, if needed. At the same time, China’s rebounding economy and solid mid-teens consensus earnings growth estimates should support current valuations.

China’s newly released five-year plan could support businesses benefiting from the “dual-circulation” announcement focused on domestic demand and self-sufficiency in key areas of technology, innovation, health care and the digitalization of its economy. Meanwhile China has not given up its participation in the global economy—just in the last quarter alone, China concluded two key trade negotiations, RCEP (Regional Comprehensive Economic Cooperation) with mostly Asian counties and a bilateral investment agreement with the European Union.  The investment agreement with the European Union includes for the first time, specific language to rein in behavior of State Owned Enterprises. This shows quite significant progress of the long waited reform. Geopolitical factors, especially U.S. – China relations under the Biden administration, will also influence the unfolding of Asia market in the new year. We believe a total-return approach, balancing dividend income with dividend growth, should continue to help us uncover attractive market opportunities in 2021.

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. 

Index Definitions