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
3.34%
YTD Return (USD)
(as of 15/10/2021)
$22.89
Price (USD)
(as of 15/10/2021)
$19.58 million
Fund Assets
(as of 30/09/2021)
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 | $19.58 million (30/09/2021) | |
| 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 31/03/2021 | 1.11% ( USD ) | |
Performance
- Monthly
- Quarterly
- Calendar Year
- Rolling 12 Month
Returns
As of 30/09/2021
As of 30/09/2021
For the years ended December 31st
For the period ended 30/09/2021
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 30/09/2021)
2.67%
Dividend Yield
Source: FactSet Research Systems, Bloomberg, Matthews Asia
Portfolio Characteristics
(as of 30/09/2021)Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia
Top 10 Holdings
(as of 30/09/2021)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 30/09/2021)- Sector Allocation
- Asset Type Breakdown
- Market Cap Exposure
- China Exposure
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.
Ratings
(as of 30/09/2021)
CATEGORY: China Equity
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
Sherwood Zhang, CFA
Lead Manager
Sherwood Zhang, CFA
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews Asia. He manages the firm's China Dividend Strategy and co-manages the Asia Dividend and Asia ex Japan Dividend 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.
Yu Zhang, CFA
Co-Manager
Yu Zhang, CFA
Portfolio Manager
Yu Zhang is a Portfolio Manager at Matthews Asia. He 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.
S. Joyce Li, CFA
Co-Manager
S. Joyce Li, CFA
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.
Latest China Research & Insights
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 30 June 2021
For the first half of 2021, the Matthews China Dividend Fund returned 12.33%, while its benchmark, the MSCI China Index, returned 1.89%. For the quarter ending 30 June, the Matthews China Dividend Fund returned 11.47%, while its benchmark, the MSCI China Index, returned 2.32%.
Market Environment:
Chinese equity markets recovered in the second quarter, post a volatile first quarter, driven by resilient first quarter results coming out of the A-shares. Many investors anticipated a strong market rally approaching the Chinese Communist Party’s 100-year anniversary, however this optimistic scenario was never truly realized. During May, the Chinese government began to release the 7th population census data, which was delayed by a month. One clear trend within the census data is that the Chinese population continues to age, and birth rates have been trending down. The once-a-decade census data has many long-term implications, and Chinese authorities seem eager to take action to reverse the aging population trend. Later in May, the Chinese government announced that married couples will now be allowed to have three children, further relaxing its family planning policy. In addition, a series of surprisingly harsh and negative policy measures targeting the after-school tutoring industry has been rumored to be implemented starting this summer. The intention of these measures seems directly related to the escalating education cost of children, which many families cited as a key reason for not having more kids.
Performance Contributors and Detractors:
During the first half of 2021, the Fund’s significant outperformance relative to its benchmark was mostly driven by security selection, especially in the information technology, real estate and consumer discretionary sectors. On the other hand, our security selection in the materials sector and underweight to the health care sector have been the biggest drags on relative performance.
SITC International Holdings Co., Ltd., the leading intra-Asia regional container shipping company, has continued to benefit from escalating shipping rates globally, making it the top contributor to absolute performance during the first half of the year. Shimao Service Holdings , a property management company, and China Suntien Green Energy Corporation, a natural gas utility company with business exposure in wind energy, are the second- and third-highest performance contributors. It is worth mentioning that both companies had periods of significant share price sell-off last year due to reasons not related to their business fundamentals. As a long-term investor, we added to our positions during the sell-offs, and we are pleased to see these holdings become top performance contributors during the period.
On the contrary, recent portfolio addition Haier Smart Home Co., a company engaged in the research, development, production and sale of smart home appliances, was the largest performance detractor for the first half. As various commodity prices have increased, investors are worried about whether the company’s profit margin will be under pressure. For now, we believe Haier still has room to improve its margin compared with industry peers, and its global presence increases the company’s ability to pass on its increased costs. Cathay Media and Education Group Inc., which operates both for-profit higher education and TV drama production businesses, is the second largest performance detractor, as its anticipated tuition cap set by the Chinese government could be lower than the market anticipated—we are closely monitoring this situation.
Notable Portfolio Changes:
During the second quarter, we initiated a position in the Chinese e-commerce giant Alibaba Group Holding as the company’s valuation was still depressed by last year’s failed Ant Financial IPO. We appreciate Alibaba’s still-healthy cash flow generation and dominant position in e-commerce, online payment and cloud computing in China. Additionally, the company’s share buyback program is becoming recurring—we see this as almost equivalent to a recurring dividend payout policy.
During the sell-off in Taiwan’s equity markets in May trigged by a COVID-19 outbreak, we rotated capital from semiconductor company MediaTek Inc. and used the proceeds to partly fund new investments in E Ink Corporation and Silergy Corp. MediaTek has performed very well since we initiated the position, but we think the company’s attractive fundamentals and growth prospects have largely been reflected in its valuation. E Ink is the leading supplier of displays for e-readers globally, and as people spend more time looking at computer screens, we believe they will become more concerned regarding potential resultant eye health issues, especially among children. We believe E Ink’s unique display solution is well-suited to alleviate the issue. Silergy is a leading China-based logic chip design house. We believe the company has ample market share to gain from global competitors, as the import substitution trend continues in China’s chip industry.
We also exited our positions in Excellence Commercial and Facilities Property Management Group Ltd. and HKBN Ltd., as we are increasingly less convinced of their growth potential.
Outlook:
We remain constructive on China’s equity earnings growth outlook and continue to actively seek out investments at reasonable valuations. China is one of the first countries to normalize monetary policies post the COVID-19 pandemic, and therefore it may have more “dry powder” to support the economy as needed. However, in the near term, due to high base effect and increased regulatory risk, there could be down-side risk to Chinese corporates’ earnings. When these potential earnings downgrades are fully discounted, the market should refocus on structural growth drivers to corporate earnings.
Rolling 12 Month Returns For the period ended 30/09/2021 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg