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Matthews China A-Share Fund

Snapshot
  • High-conviction, long-only equity portfolio focused on companies benefiting from China’s economic evolution
  • All-cap fundamental GARP approach driven by on-the-ground, proprietary research
  • Focus on “new economy” sectors such as information technology, health care and consumer discretionary

21/07/2022

Inception Date

-0.54%

YTD Return (USD)

(as of 19/04/2024)

$7.43

NAV (USD)

(as of 19/04/2024)

-0.08

1 Day NAV Change

(as of 19/04/2024)

Objective

Seeks to achieve long term capital appreciation.

Sustainability

The Fund promotes environmental and social characteristics according to Article 8 of SFDR. Furthermore, the Fund uses both activity- and norm-based exclusions. Information relating to the environmental and social characteristics of this Fund is available in the prospectus.

Strategy

The Fund seeks to achieve its investment objective by investing, directly or indirectly, primarily (i.e., at least 65% of its net assets) in equities of companies listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange and traded and denominated in the currency of China, the renminbi ("China A Shares"). On an ancillary basis, the Fund may invest in other permitted assets on a worldwide basis. For the 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 invest (whether directly or indirectly) in China A Shares, either directly via a Qualified Foreign Investor (“QFI”) license awarded to the Company, or via the Shanghai-Hong Kong Stock Connect and/or Shenzhen-Hong Kong Stock Connect programs, or indirectly via investment in access products.

Fund Facts
Inception Date 21/07/2022
Fund Assets $3.73 million (31/03/2024)
Base Currency USD
ISIN: LU2459556184 (USD) LU2459556267 (GBP)
Bloomberg Symbol MAFCASI:LX (USD) MATACAI:LX (GBP)
Benchmark MSCI China A Onshore index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
SFDR Classification Article 8
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 30/09/2023 1.00% ( USD ) 1.00% ( GBP )

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 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. 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.

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. China listed companies and trading of China A Shares are subject to market rules and disclosure requirements in the China stock market. Any changes in laws, regulations, rules and policies of the China A Share market may affect share prices. There are foreign shareholding restrictions and disclosure obligations applicable to China A Shares. The Fund will be subject to restrictions on trading (including restriction on retention of proceeds) in China A Shares as a result of its interest in the China A Shares. Part of the assets of the Fund may be invested in China A Shares through the use of a Qualified Foreign Investor (“QFI”) license. There are rules and restrictions under current QFI regulations including rules on remittance of principal, investment restrictions, and repatriation of principal and profits. The Fund may invest in China A Shares trading on the Shanghai Stock Exchange and Shenzhen Stock Exchange via Stock Connect which is subject to a daily quota. If the daily quota is exceeded, buy orders will be rejected. Additional risks applicable to using Stock Connect include, but are not limited to, legal/beneficial ownership risk, clearing and settlement and custody risk, suspension risk, differences in trading days, operational risk, regulatory risk, Nominee Arrangements in Holding China A Shares, investor compensation, and taxation risks.

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

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/03/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China A-Share Fund (USD)
1.23% -0.67% -0.67% -20.73% n.a. n.a. n.a. -16.15% 21/07/2022
MSCI China A Onshore index (USD)
-0.23% -0.68% -0.68% -17.09% n.a. n.a. n.a. -13.70%
Matthews China A-Share Fund (GBP)
1.30% -0.14% -0.14% -22.39% n.a. n.a. n.a. -18.99% 21/07/2022
MSCI China A Onshore index (GBP)
-0.10% 0.23% 0.23% -18.85% n.a. n.a. n.a. -16.49%
As of 31/03/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China A-Share Fund (USD)
1.23% -0.67% -0.67% -20.73% n.a. n.a. n.a. -16.15% 21/07/2022
MSCI China A Onshore index (USD)
-0.23% -0.68% -0.68% -17.09% n.a. n.a. n.a. -13.70%
Matthews China A-Share Fund (GBP)
1.30% -0.14% -0.14% -22.39% n.a. n.a. n.a. -18.99% 21/07/2022
MSCI China A Onshore index (GBP)
-0.10% 0.23% 0.23% -18.85% n.a. n.a. n.a. -16.49%
For the years ended December 31st
Name 2023 2022 2021 2020 2019
Matthews China A-Share Fund (USD)
-18.00% n.a. n.a. n.a. n.a.
MSCI China A Onshore index (USD)
-11.46% n.a. n.a. n.a. n.a.
Matthews China A-Share Fund (GBP)
-22.28% n.a. n.a. n.a. n.a.
MSCI China A Onshore index (GBP)
-16.45% n.a. n.a. n.a. n.a.
For the period ended 31/03/2024
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China A-Share Fund (USD)
-20.73% n.a. n.a. n.a. n.a. 21/07/2022
MSCI China A Onshore index (USD)
-17.09% n.a. n.a. n.a. n.a.
Matthews China A-Share Fund (GBP)
-22.39% n.a. n.a. n.a. n.a. 21/07/2022
MSCI China A Onshore index (GBP)
-18.85% n.a. n.a. n.a. n.a.

Source: Brown Brothers Harriman (Luxembourg) S.C.A.

All returns over 1 year are annualized

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.

Portfolio Characteristics

(as of 31/03/2024)
Fund Benchmark
Number of Positions 43 690
Weighted Average Market Cap $45.2 billion $40.1 billion
Active Share 99.7 n.a.
P/E using FY1 estimates 16.3x 13.1x
P/E using FY2 estimates 13.7x 11.6x
Price/Cash Flow 10.8 6.7
Price/Book 2.9 1.6
Return On Equity 19.8 14.0
EPS Growth (3 Yr) 27.9% 21.2%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/03/2024)
Name Sector % Net Assets
Kweichow Moutai Co., Ltd. Consumer Staples 5.0
China Merchants Bank Co., Ltd. Financials 4.7
Himile Mechanical Science and Technology (Shandong) Co., Ltd. Industrials 4.0
Focus Media Information Technology Co., Ltd. Communication Services 3.6
Sungrow Power Supply Co., Ltd. Industrials 3.3
Will Semiconductor Co., Ltd. Shanghai Information Technology 3.3
BYD Co., Ltd. Consumer Discretionary 3.3
Contemporary Amperex Technology Co., Ltd. Industrials 3.1
Midea Group Co., Ltd. Consumer Discretionary 3.1
Jason Furniture Hangzhou Co., Ltd. Consumer Discretionary 3.0
TOTAL 36.4

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 31/03/2024)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Industrials 30.5 15.9 14.6
Consumer Discretionary 17.8 7.8 10.0
Consumer Staples 15.4 11.5 3.9
Information Technology 11.7 17.7 -6.0
Financials 7.7 18.1 -10.4
Materials 4.5 11.1 -6.6
Communication Services 3.6 2.4 1.2
Health Care 1.9 8.2 -6.3
Utilities 0.0 3.2 -3.2
Energy 0.0 2.9 -2.9
Real Estate 0.0 1.3 -1.3
Cash and Other Assets, Less Liabilities 7.0 0.0 7.0

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 37.0 32.8 4.2
Large Cap ($10B-$25B) 26.8 26.8 0.0
Mid Cap ($3B-$10B) 20.8 31.5 -10.7
Small Cap (under $3B) 8.5 8.9 -0.4
Cash and Other Assets, Less Liabilities 7.0 0.0 7.0
China Exposure Portfolio Weight
Mainland China Listed Companies 93.0
Cash and Other Assets, Less Liabilities 7.0

Mainland China listed companies includes A Share and B Shares. 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. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

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.

ESG Characteristics

(as of 31/03/2024)
  • Business Involvement
  • Sustainability Attributes
Name Fund Benchmark Difference
Controversial Weapons
Fund Coverage: 95% Benchmark Coverage: 96%
0.0 0.2 -0.2
Tobacco
Fund Coverage: 95% Benchmark Coverage: 96%
0.0 0.0 0.0
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 95%
0.0 0.2 -0.2
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 99%
21.2 19.8 1.4

Board Diversity: Represents the weighted average ratio of female board members in investee companies.
Tobacco: Represents companies that generate more than 5% of revenue from tobacco manufacturing exposure to or production or that generate more than 50% of revenue from tobacco retail. 
UN Global Compact Violators: Represents companies that have been assessed as failing to comply with the 10 United Nations Global Compact Principles by ISS-ESG Norms-Based Research. Different ESG research providers may come to different conclusions on the severity of the violation.
Controversial weapons include companies with involvement in the following: anti-personnel mines; biological and chemical weapons; cluster weapons; depleted uranium; nuclear weapons and white phosphorus. A company is excluded if it is directly involved in the production, selling and/or distribution of (parts of) controversial weapons and this involvement concerns the core weapon system, or components/services of the core weapon system that are tailor-made and essential for the lethal use of the weapon.

Source: Sustainalytics, Factset, MSCI, Matthews Asia.

GHG Intensity

(as of 31/03/2024)

Fund Coverage: 99%; Benchmark Coverage: 94% as of 31/03/2024

GHG Intensity: Represents the normalized portfolio’s total weighted average (scope 1 + scope 2) carbon emissions intensity, using the most recently available data (emissions data from 2020, 2021). Carbon intensity represents the issuer’s total carbon emissions per EUR million of revenue (tCO2e divided by EUR million in revenue).

Source: Sourced from ISS ESG. Where not covered by external data providers, we have tried to source these data points.

Sustainability-related Disclosures

This Fund Yes No
Complies with Article 8 of SFDR  
Investment process integrates ESG factors and sustainability risks based on proprietary and third-party research  
Applies norms- and activity-based exclusions  
Promotes environmental and social characteristics  
Has a sustainable investment objective  
Conducts engagement  
Exercises Voting Rights  

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 Fund’s investment objective and risk factors.

For more information, please refer to our Responsible Investment and Stewardship Policy and our ESG-Related Investment Policy of Matthews Asia Funds.

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager

Commentary

Period ended 31 March 2024

Market Environment

  • Chinese stocks were volatile in the first quarter, and we saw steep falls particularly in some of the smaller indexes. Chinese equities continued to face pressure because of lingering, broad-based concerns including the implications surrounding the late year U.S. elections, deflationary pressures driven by excess capacity, the lack of large-scale policy support for the property sector and the sluggishness in the recovery in consumer demand.
  • Economic recovery has been much weaker than the market expected and there are only incremental signs that China’s property market is beginning to turn a corner. 
  • Some of the government’s efforts have also started to gain traction, such as initiatives to support the stock market by buying equities and restricting certain stock sales and short selling. These efforts helped stabilize the market in February and supported a short-lived rally.

Contributors and Detractors

  • For the quarter ended March 31, 2024, the China A-Share Fund returned -0.67%, (I Acc USD) while its benchmark, the MSCI China A Onshore Index, returned -0.68% over the same period.
  • The top three contributors to relative performance, on a sector basis, were consumer discretionary due to an overweight position and stock selection, health care due to an underweight allocation, and industrials due to an overweight allocation. The top three detractors to relative performance were information technology (IT) due to stock selection, energy due to zero allocation and financials due to an underweight allocation.
  • The three largest contributors to absolute performance during the quarter included Wolong Electric Group, a Chinese mini electric machinery manufacturer, Shandong Himile Mechanical, which develops, produces and sells tire molds, and Midea Group, an electrical appliances manufacturer. The top three detractors to performance included Opt Machine Vision Tech, an automated core components manufacturer, Zwsoft Guangzhou, an IT company, and Zhejiang Sanhua Intelligent Controls, an electrical appliance parts manufacturer.

Outlook

  • Looking ahead, the question remains as to whether China’s equity markets are charting a sustainable path of recovery. Notwithstanding the well-known concerns, investor sentiment is improving toward China based upon perceived risk/reward.
  • Marginal year-over-year improvement in earnings expectations combined with stock multiples trading at roughly a 50% discount to February 2021 highs is giving investors’ confidence that current valuations provide an adequate cushion for unforeseen risks.
  • The calculus suggests that even with little to no improvement in sentiment or stock multiples, consensus estimates in year-over-year earnings growth could lead to attractive equity returns.
  • Thus, we are still in a cautious frame of mind, tinged with some optimism. While last year we think Chinese government policy over promised and under achieved, this year we think the government is seeking to under promise and overachieve. One potentially destabilizing variable on our radar is geopolitics, particularly with the U.S. election approaching. 

 

Rolling 12 Month Returns For the period ended 31/03/2024 - I (Acc)
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China A-Share Fund (USD)
-20.73% N.A. N.A. N.A. N.A. 21/07/2022
MSCI China A Onshore index (USD)
-17.09% N.A. N.A. N.A. N.A.
Matthews China A-Share Fund (GBP)
-22.39% N.A. N.A. N.A. N.A. 21/07/2022
MSCI China A Onshore index (GBP)
-18.85% N.A. N.A. N.A. N.A.

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg

To find documents in additional languages, please visit the Fund Literature page in our Resources section.

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. 

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