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.
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets in companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.
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. The Fund invests in holdings denominated in foreign currencies, 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.
These and other risks associated with investing in the Fund can be found in the
prospectus.
Asia Ex Japan: Consists of all countries and markets in Asia, excluding Japan but including all developed, emerging and frontier countries and markets in Asia
Fees & Expenses
Management Fee
0.75%
Total Expense Ratio
As of 31/03/2022
0.90%
( USD )
0.90%
( GBP )
Objective
Long-term capital appreciation.
Strategy
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets in companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.
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. The Fund invests in holdings denominated in foreign currencies, 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.
The risks associated with investing in the Fund can be found in the prospectus
Performance
Monthly
Quarterly
Calendar Year
Rolling 12 Month Returns
As of 31/08/2023
Average Annual Total Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews Asia Innovative Growth Fund (USD)
-6.59%
1.63%
-3.70%
-6.87%
n.a.
n.a.
n.a.
-17.57%
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-6.39%
2.21%
2.59%
-0.24%
n.a.
n.a.
n.a.
-10.55%
Matthews Asia Innovative Growth Fund (GBP)
-5.17%
-1.02%
-8.61%
-14.59%
n.a.
n.a.
n.a.
-14.67%
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-4.95%
-0.03%
-2.61%
-8.39%
n.a.
n.a.
n.a.
-7.39%
As of 30/06/2023
Average Annual Total Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews Asia Innovative Growth Fund (USD)
2.44%
-4.84%
-2.93%
-8.71%
n.a.
n.a.
n.a.
-18.46%
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
2.81%
-1.14%
3.19%
-0.76%
n.a.
n.a.
n.a.
-11.06%
Matthews Asia Innovative Growth Fund (GBP)
0.00%
-6.92%
-7.67%
-12.61%
n.a.
n.a.
n.a.
-15.29%
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
0.22%
-3.86%
-2.36%
-5.20%
n.a.
n.a.
n.a.
-7.81%
For the years ended December 31st
Name
2022
2021
2020
2019
2018
Matthews Asia Innovative Growth Fund (USD)
-24.74%
n.a.
n.a.
n.a.
n.a.
MSCI All Country Asia ex Japan Index (USD)
-19.36%
n.a.
n.a.
n.a.
n.a.
Matthews Asia Innovative Growth Fund (GBP)
-15.66%
n.a.
n.a.
n.a.
n.a.
MSCI All Country Asia ex Japan Index (GBP)
-9.19%
n.a.
n.a.
n.a.
n.a.
For the period ended 30/06/2023
Name
2023
2022
2021
2020
2019
Inception Date
Matthews Asia Innovative Growth Fund (USD)
-8.71%
-34.00%
n.a.
n.a.
n.a.
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-0.76%
-24.78%
n.a.
n.a.
n.a.
Matthews Asia Innovative Growth Fund (GBP)
-12.61%
-24.45%
n.a.
n.a.
n.a.
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-5.20%
-14.44%
n.a.
n.a.
n.a.
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.
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 31/08/2023)
Sector Allocation
Country Allocation
Market Cap Exposure
Sector
Fund
Benchmark
Difference
Information Technology
31.4
23.7
7.7
Consumer Discretionary
31.2
15.1
16.1
Financials
11.5
20.7
-9.2
Communication Services
10.7
9.7
1.0
Industrials
6.0
7.3
-1.3
Health Care
2.6
3.9
-1.3
Energy
2.5
3.7
-1.2
Real Estate
2.0
3.3
-1.3
Consumer Staples
1.9
5.1
-3.2
Materials
0.0
5.2
-5.2
Utilities
0.0
2.4
-2.4
Cash and Other Assets, Less Liabilities
0.4
0.0
0.4
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
Country
Fund
Benchmark
Difference
China/Hong Kong
41.2
40.6
0.6
India
22.0
17.1
4.9
Taiwan
12.9
17.2
-4.3
South Korea
8.8
14.1
-5.3
United States
4.7
0.0
4.7
Indonesia
2.9
2.3
0.6
Netherlands
1.5
0.0
1.5
Japan
1.3
0.0
1.3
Singapore
1.1
3.8
-2.7
France
1.1
0.0
1.1
Germany
1.1
0.0
1.1
Vietnam
1.1
0.0
1.1
Thailand
0.0
2.3
-2.3
Malaysia
0.0
1.6
-1.6
Philippines
0.0
0.7
-0.7
Macau
0.0
0.3
-0.3
Cash and Other Assets, Less Liabilities
0.4
0.0
0.4
Not all countries are included in the benchmark index(es).
Equity market cap of issuer
Fund
Benchmark
Difference
Mega Cap (over $25B)
69.9
59.1
10.8
Large Cap ($10B-$25B)
12.8
19.8
-7.0
Mid Cap ($3B-$10B)
14.9
19.1
-4.2
Small Cap (under $3B)
2.1
2.0
0.1
Cash and Other Assets, Less Liabilities
0.4
0.0
0.4
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.
Michael Oh is a Portfolio Manager at Matthews and manages the firm’s Asia Innovators and Korea Strategies and co-manages the Asia Growth Strategy. Michael joined Matthews in 2000, and has built his investment career at the firm. Michael was promoted from Research Analyst to Assistant Portfolio Manager in 2003. In 2006 and 2007, he was promoted to Lead Manager of the Matthews Asia Innovators Strategy and the Matthews Korea Strategy, respectively. From 2000-2003, Michael’s research focused on the technology sector supporting multiple strategies managed by the founders of the firm. As a research analyst, he contributed investment ideas to the broader Matthews investment teams. Michael received a B.A. in Political Economy of Industrial Societies from the University of California, Berkeley. He is fluent in Korean.
Taizo Ishida is a Portfolio Manager at Matthews and manages the firm’s Asia Growth and Japan Strategies, and co-manages the firm’s Asia Innovators Strategy. Prior to joining Matthews in 2006, Taizo spent six years on the global and international teams at Wellington Management Company as a Vice President and Portfolio Manager. From 1997 to 2000, he was a Senior Securities Analyst and a member of the international investment team at USAA Investment Management Company. From 1990 to 1997, he was a Principal and Senior Research Analyst at Sanford Bernstein & Co. Prior to beginning his investment career at Yamaichi International (America), Inc. as a Research Analyst, he spent two years in Dhaka, Bangladesh as a Program Officer with the United Nations Development Program. Taizo received a B.A. in Social Science from International Christian University in Tokyo and an M.A. in International Relations from The City College of New York. He is fluent in Japanese.
Inbok Song is a Portfolio Manager at Matthews and manages the firm’s Pacific Tiger Strategy and co-manages the Asia ex Japan Total Return Equity, Emerging Markets Sustainable Future and Asia Innovators Strategies. Prior to rejoining Matthews in 2019, Inbok spent three years at Seafarer Capital Partners as a portfolio manager, the firm’s Director of Research and chief data scientist. Previously she was at Thornburg Investment Management as an associate portfolio manager. From 2007 to 2015, she was at Matthews, most recently as a portfolio manager. From 2005 to 2006, Inbok served as an Analyst and Technology Specialist at T. Stone Corp., a private equity firm in Seoul, South Korea. From 2004 to 2005, she was a research engineer for Samsung SDI in Seoul. Inbok received both a B.A. and Masters in Materials Science and Engineering from Seoul National University. She received a Masters in International Management from the University of London, King’s College, and also an M.A. in Management Science and Engineering, with a concentration in finance from Stanford University. Inbok is fluent in Korean.
For the first half of 2023, the Matthews Asia Innovative Growth Fund returned -2.93%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned 3.19% over the same period. For the quarter ended 30 June 2023, the Fund returned -4.84%, while the benchmark returned -1.14%.
Market Environment:
The big event of 2023’s first half was undoubtedly China’s reopening—and more specifically, an economic rebound that has been slower to materialize than many investors anticipated. This especially weighed on consumer sentiment which remains relatively dour. Despite having ample cash balances, many Chinese consumers seem reluctant to resume spending at pre-pandemic levels. This has further complicated the government’s ability to effect meaningful changes as much of any fiscal stimulus would probably wind up in consumer savings accounts. China’s property market also remains weak and is adding to consumers’ sense of uncertainty—given many people’s wealth is tied to real estate. In addition, ongoing tensions with the U.S. weighed on sentiment and amplified uncertainty. Elsewhere, India remains a bright spot in Asia as it faces far fewer challenges in the current environment than China. South Korea and Taiwan have also outperformed as they are (to varying degrees) benefiting from the nascent artificial intelligence (AI) boom, high U.S. chip demand and overall strength in the American technology industry.
Performance Contributors and Detractors:
Regionally, our overweight and stock selection in China and Hong Kong were the biggest detractors to relative performance in the first half amid an environment of negative economic and consumer sentiment. Conversely, the Fund’s allocation to the U.S.—which consists primarily of technology companies—was the biggest contributor. These stocks benefited as investors sought exposure to Asia via non-China-domiciled companies in order to manage geopolitical concerns.
From a sector perspective, the Fund’s overweight and stock selection in consumer discretionary was the biggest detractor in the face of headwinds in China. Stock selection in communication services was also a big detractor though mitigated by our overweight allocation to the sector. Selections in health care, consumer staples and industrials were also detractors. Conversely, IT was the top contributor because of strength in hardware and digital services companies, and stock selection in real estate and our underweight and selection in financials also contributed to relative performance.
At the individual holdings level, sportswear giant Li Ning and e-commerce platform JD.com were among the weakest performers in the first half. JD.com has faced stiff pressure from rival platforms Alibaba and PDD Holdings (Pinduoduo), both of which are portfolio holdings. Given these dynamics, we chose to exit our position in JD.com. While Alibaba and PDD were bigger detractors in the period than JD.com we retained our positions in them because in our view they are more diversified and have higher potential growth than JD.com.
Conversely, U.S. tech giant NVIDIA, a leading beneficiary of the AI upswing, was the strongest contributor in the first half. Taiwanese technology companies Alchip Technologies and Taiwan Semiconductor Manufacturing Co. (TSMC) were also strong performers. Alchip has performed particularly well as the nascent AI trend has picked up steam. TSMC has benefited from the ongoing semiconductor boom—particularly as geopolitical tensions with the U.S. have driven many companies to source chips outside of China. TSMC also manufactures chips for NVIDIA and so is well-positioned for the expanding AI market.
Notable Portfolio Changes:
In the quarter, we initiated a new position in ASML Holding, a Netherlands-based semiconductor company. ASML derives most of its revenue from Asia where the majority of global chip manufacturing is located. It also has a very strong position in advanced chip-equipment production and is a beneficiary from some chip companies seeking to strengthen supply chains and move manufacturing away from China to the U.S. and Europe.
We also increased our exposure to PDD and Samsung Electronics. While the ongoing consumer malaise in China has challenged e-commerce companies and weighed on valuations, PDD is a company that is growing and taking share. We accordingly capitalized on its attractive valuation to add to our position. We increased our exposure to Samsung given the combination of its exposure to AI and its depressed valuation.
Conversely, we pared our exposure to Singapore-based Sea following a strong first-half performance in the stock. We trimmed our holding in H World Group given its higher valuation and as part of our ongoing reduction in our China exposure. We also hold Trip.com, which offers us similar exposure to H World though at a more attractive valuation and with, in our view, a better outlook. In addition to exiting JD.com in the period we also sold our holding in Li Ning.
Outlook:
It seems clear to us that market movement in the second half will be heavily dependent on China’s performance. But China’s government has its work cut out. With the property market so depressed and consumers quite dour, it will be hard to kickstart the economy. That said, it also seems unlikely there is much room to the downside at this point—though we say that with caution as it seems many have called a bottom in China, only for it to sink further. Given the general sense of gloom surrounding China, it might not take much to spark a sentiment rally and turn things around. Time will naturally tell and we will continue monitoring how events develop in China.
Meanwhile, we remain positive on India. We are also positive on Indonesia in the long term but given there are currently relatively few innovative companies in Southeast Asia, our overall exposure to the region remains limited for now. We are also underweight in Taiwan. While fundamentals remain largely intact, strong performance has contributed to elevated valuations making Taiwan less attractive on a relative basis.
Uncertainty aside, we are finding innovative companies throughout Asia that are trading at attractive levels and will continue deploying our investment philosophy to uncover what we believe to be the next generation of companies able to innovate in business strategy, products and services, marketing and human capital.
Rolling 12 Month Returns For the period ended 30/06/2023 - I (Acc)
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 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 MSCI China A Onshore Index captures large and mid cap representation across China securities listed on the Shanghai and Shenzhen exchanges. Index is for comparative purposes only and it is not possible to invest directly in an index.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
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).
The MSCI India Index is a free float-adjusted market capitalization-weighted index of Indian equities listed in India.
Indexes are for comparative purposes only and it is not possible to invest directly in an index.
Commentary
Period ended 30 June 2023
For the first half of 2023, the Matthews Asia Innovative Growth Fund returned -2.93%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned 3.19% over the same period. For the quarter ended 30 June 2023, the Fund returned -4.84%, while the benchmark returned -1.14%.
Market Environment:
The big event of 2023’s first half was undoubtedly China’s reopening—and more specifically, an economic rebound that has been slower to materialize than many investors anticipated. This especially weighed on consumer sentiment which remains relatively dour. Despite having ample cash balances, many Chinese consumers seem reluctant to resume spending at pre-pandemic levels. This has further complicated the government’s ability to effect meaningful changes as much of any fiscal stimulus would probably wind up in consumer savings accounts. China’s property market also remains weak and is adding to consumers’ sense of uncertainty—given many people’s wealth is tied to real estate. In addition, ongoing tensions with the U.S. weighed on sentiment and amplified uncertainty. Elsewhere, India remains a bright spot in Asia as it faces far fewer challenges in the current environment than China. South Korea and Taiwan have also outperformed as they are (to varying degrees) benefiting from the nascent artificial intelligence (AI) boom, high U.S. chip demand and overall strength in the American technology industry.
Performance Contributors and Detractors:
Regionally, our overweight and stock selection in China and Hong Kong were the biggest detractors to relative performance in the first half amid an environment of negative economic and consumer sentiment. Conversely, the Fund’s allocation to the U.S.—which consists primarily of technology companies—was the biggest contributor. These stocks benefited as investors sought exposure to Asia via non-China-domiciled companies in order to manage geopolitical concerns.
From a sector perspective, the Fund’s overweight and stock selection in consumer discretionary was the biggest detractor in the face of headwinds in China. Stock selection in communication services was also a big detractor though mitigated by our overweight allocation to the sector. Selections in health care, consumer staples and industrials were also detractors. Conversely, IT was the top contributor because of strength in hardware and digital services companies, and stock selection in real estate and our underweight and selection in financials also contributed to relative performance.
At the individual holdings level, sportswear giant Li Ning and e-commerce platform JD.com were among the weakest performers in the first half. JD.com has faced stiff pressure from rival platforms Alibaba and PDD Holdings (Pinduoduo), both of which are portfolio holdings. Given these dynamics, we chose to exit our position in JD.com. While Alibaba and PDD were bigger detractors in the period than JD.com we retained our positions in them because in our view they are more diversified and have higher potential growth than JD.com.
Conversely, U.S. tech giant NVIDIA, a leading beneficiary of the AI upswing, was the strongest contributor in the first half. Taiwanese technology companies Alchip Technologies and Taiwan Semiconductor Manufacturing Co. (TSMC) were also strong performers. Alchip has performed particularly well as the nascent AI trend has picked up steam. TSMC has benefited from the ongoing semiconductor boom—particularly as geopolitical tensions with the U.S. have driven many companies to source chips outside of China. TSMC also manufactures chips for NVIDIA and so is well-positioned for the expanding AI market.
Notable Portfolio Changes:
In the quarter, we initiated a new position in ASML Holding, a Netherlands-based semiconductor company. ASML derives most of its revenue from Asia where the majority of global chip manufacturing is located. It also has a very strong position in advanced chip-equipment production and is a beneficiary from some chip companies seeking to strengthen supply chains and move manufacturing away from China to the U.S. and Europe.
We also increased our exposure to PDD and Samsung Electronics. While the ongoing consumer malaise in China has challenged e-commerce companies and weighed on valuations, PDD is a company that is growing and taking share. We accordingly capitalized on its attractive valuation to add to our position. We increased our exposure to Samsung given the combination of its exposure to AI and its depressed valuation.
Conversely, we pared our exposure to Singapore-based Sea following a strong first-half performance in the stock. We trimmed our holding in H World Group given its higher valuation and as part of our ongoing reduction in our China exposure. We also hold Trip.com, which offers us similar exposure to H World though at a more attractive valuation and with, in our view, a better outlook. In addition to exiting JD.com in the period we also sold our holding in Li Ning.
Outlook:
It seems clear to us that market movement in the second half will be heavily dependent on China’s performance. But China’s government has its work cut out. With the property market so depressed and consumers quite dour, it will be hard to kickstart the economy. That said, it also seems unlikely there is much room to the downside at this point—though we say that with caution as it seems many have called a bottom in China, only for it to sink further. Given the general sense of gloom surrounding China, it might not take much to spark a sentiment rally and turn things around. Time will naturally tell and we will continue monitoring how events develop in China.
Meanwhile, we remain positive on India. We are also positive on Indonesia in the long term but given there are currently relatively few innovative companies in Southeast Asia, our overall exposure to the region remains limited for now. We are also underweight in Taiwan. While fundamentals remain largely intact, strong performance has contributed to elevated valuations making Taiwan less attractive on a relative basis.
Uncertainty aside, we are finding innovative companies throughout Asia that are trading at attractive levels and will continue deploying our investment philosophy to uncover what we believe to be the next generation of companies able to innovate in business strategy, products and services, marketing and human capital.
Rolling 12 Month Returns For the period ended 30/06/2023 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg