TOP

Matthews Asia Innovative Growth Fund

  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

23/03/2021

Inception Date

-31.01%

YTD Return (USD)

(as of 30/09/2022)

$5.94

NAV (USD)

(as of 30/09/2022)

-0.05

1 Day NAV Change

(as of 30/09/2022)

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.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 23/03/2021
Fund Assets $32.66 million (31/08/2022)
Base Currency USD
ISIN: LU2298459939 (USD) LU2298460192 (GBP)
Bloomberg Symbol MAIGIUA:LX (USD) MAIGIAG:LX (GBP)
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus 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 )

Performance

  • Monthly
  • Quarterly
  • Rolling 12 Month
    Returns
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 31/08/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
0.45% -0.15% -22.18% -30.21% n.a. n.a. n.a. -24.26% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
0.02% -5.46% -17.07% -21.45% n.a. n.a. n.a. -17.07%
Matthews Asia Innovative Growth Fund (GBP)
5.02% 8.02% -9.76% -17.27% n.a. n.a. n.a. -14.72% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
4.60% 2.40% -3.47% -7.10% n.a. n.a. n.a. -6.68%
As of 30/06/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
2.68% -2.55% -19.98% -34.00% n.a. n.a. n.a. -25.40% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-4.40% -8.90% -16.14% -24.78% n.a. n.a. n.a. -18.40%
Matthews Asia Innovative Growth Fund (GBP)
6.66% 5.51% -10.90% -24.45% n.a. n.a. n.a. -17.34% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-0.79% -1.23% -6.48% -14.44% n.a. n.a. n.a. -9.82%
For the period ended 30/06/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-34.00% n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-24.78% n.a. n.a. n.a. n.a.
Matthews Asia Innovative Growth Fund (GBP)
-24.45% n.a. n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-14.44% n.a. n.a. n.a. n.a.

Performance information for S share classe will not be shown until they have at least a one year track record. View I Class Performance.

Portfolio Characteristics

(as of 31/08/2022)
Fund Benchmark
Number of Positions 43 1,201
Weighted Average Market Cap $85.7 billion $106.1 billion
Active Share 78.8 n.a.
P/E using FY1 estimates 21.7x 11.8x
P/E using FY2 estimates 19.6x 11.1x
Price/Cash Flow 15.8 7.0
Price/Book 3.1 1.6
Return On Equity 5.3 14.7
EPS Growth (3 Yr) -0.7% 11.2%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/08/2022)
Name Sector Country % Net Assets
ICICI Bank, Ltd. Financials India 7.2
JD.com, Inc. Consumer Discretionary China/Hong Kong 5.6
Meituan Consumer Discretionary China/Hong Kong 5.4
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 5.2
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.3
H World Group, Ltd. Consumer Discretionary China/Hong Kong 4.1
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 3.9
Reliance Industries, Ltd. Energy India 3.5
Bajaj Finance, Ltd. Financials India 3.5
HDFC Bank, Ltd. Financials India 3.2
TOTAL 45.9

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 31/08/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 36.8 15.2 21.6
Financials 21.5 20.3 1.2
Communication Services 9.3 10.1 -0.8
Consumer Staples 7.1 5.4 1.7
Information Technology 6.5 21.9 -15.4
Industrials 4.8 6.8 -2.0
Health Care 4.1 4.0 0.1
Energy 3.5 3.9 -0.4
Materials 2.5 5.4 -2.9
Real Estate 2.1 3.8 -1.7
Utilities 0.0 3.3 -3.3
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

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 56.1 43.6 12.5
India 23.1 16.4 6.7
South Korea 4.6 13.1 -8.5
Taiwan 4.2 16.3 -12.1
Indonesia 4.1 2.2 1.9
Singapore 2.8 3.6 -0.8
Vietnam 2.4 0.0 2.4
United States 1.0 0.0 1.0
Thailand 0.0 2.2 -2.2
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.9 -0.9
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

Not all countries are included in the benchmark index(es).

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 57.6 57.1 0.5
Large Cap ($10B-$25B) 27.8 22.3 5.5
Mid Cap ($3B-$10B) 9.9 18.2 -8.3
Small Cap (under $3B) 2.9 2.4 0.5
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

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.

Portfolio Managers

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Commentary

Period ended 30 June 2022

For the first half of 2022, the Matthews Asia Innovative Growth Fund returned -19.98%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned -16.14% over the same period. For the quarter ending June 30, 2022, the Fund returned -2.55%, while the benchmark returned -8.90%.

Market Environment:

The first half of the year was a challenging period. Elevated inflation data and diminishing consumer spending in many regions dampened global sentiment and sparked recessionary fears. While Asian equity markets endured choppy waters they performed well in the second quarter, experiencing less downside than commodity heavy, weak-performing EMEA (Europe, Middle East, Africa) and LatAm regions. In particular, Chinese equities saw a strong rebound—in both Hong Kong-listed stocks and local A-Shares. Chinese fiscal and monetary support, combined with more lenient zero-COVID policy implementation, a reduction of regulatory pressure on internet and platform monopolies and progress on real estate re-financing roadblocks enabled a rebound in sentiment and economic activity. Conversely, South Korea was a major market laggard followed by Taiwan, Japan and India. In terms of investing styles, Asian growth stocks continued to trail value stocks, especially in Japan, and small caps suffered more than their larger cap regional peers.

Performance Contributors and Detractors:

From a regional perspective, the Fund’s stock selection within China/Hong Kong and Singapore detracted the most to relative performance for the first half of the year. On the other hand, the Fund’s underweight allocation to South Korea and Taiwan contributed the most to relative performance. From a sector perspective, the Fund’s overweight and stock selection to higher growth communication services names detracted the most from relative performance for the period. On the other hand, stock section and overweight in consumer discretionary contributed the most to relative performance. Consumer discretionary is the biggest sector allocation and it is also where we believe innovation can flourish.

Turning to individual securities, Chinese consumer discretionary holdings H World Group, which is mainly engaged in multi-brand hotel operations, and Trip.com Group, a Chinese multinational online travel company, were the largest contributors to performance. Both companies performed well based on the expectation that China’s zero COVID policy will ease and travel activities will pick up in the country. On the other hand, communications services holdings Sea and Bilibili were among the largest detractors to performance. While Sea, an internet gaming and e-commerce company in Singapore, has achieved impressive track record in establishing sizable market share across different countries, increased uncertainty around their internet gaming revenue trends contributed to poor performance.

Bilibili, a Chinese video content company, continued to suffer from China’s policies to regulate the health and development of the country’s internet industry. However, the company’s operational metrics from user acquisition and engagement still trend positively and while we remain cautious about the ongoing regulations, we continue to hold Bilibili as the fundamentals of the company remain healthy and its position as one of the dominant players in its field has strengthened as a result of more regulatory scrutiny.

Notable Portfolio Changes:

During the second quarter, we initiated a position in Chinese health care company Innovent Biologics. Innovent, which develops and manufactures high-quality medicines for the treatment of major diseases such as cancer, rallied on positive sentiment around the likelihood it will get FDA approval for new therapy trials. Additionally, we initiated a position in Pinduoduo, a Chinese e-commerce platform offering a wide range of products including groceries, fashion, beauty and electronics. While Pinduoduo has been a loss-making company for most of its existence, it is now profitable and recent earnings results show improvement in its margin profile.

During the quarter we also exited a few positions including two Chinese stocks, Flat Glass Group which is principally involved in the research, development and sales of glass products, and Contemporary Amperex Technology, a lithium-ion battery manufacturer. In both cases we took the opportunity to take some profits and invest in other attractive Chinese companies. 

Outlook:

Looking ahead, we believe markets may see more volatility as they come to terms with the severity of Fed hikes, tighter global liquidity and protracted inflation.  That said, we believe that markets have priced in a substantial amount of uncertainty, especially within Asia and China, and not withstanding a sudden and severe downturn of global economic activity or a geopolitical shift, we believe there may be upside to come.

In particular, China should be positioned well for a pickup in domestic activity as the government is starting to support consumers and small and medium enterprises (SMEs) through gradual release of stimulus programs. Unlike the interest rate cycle in the West, interest rates are easing in China which may help lower the cost of capital for companies. In other parts of Asia, shopping mall operators in Southeast Asia stand to benefit from resumption of tourism activities. 

We continue to find many innovative companies in Asia at appealing levels today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital.

Rolling 12 Month Returns For the period ended 30/06/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-34.00% N.A. N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-24.78% N.A. N.A. N.A. N.A.
Matthews Asia Innovative Growth Fund (GBP)
-24.45% N.A. N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-14.44% N.A. N.A. N.A. N.A.

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