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Matthews Asia Small Companies Fund

Portfolio Positioning
  • Seeks alpha in innovative, capital efficient entrepreneurial companies in Asia ex Japan
  • Focus on firms that have a strong competitive advantage through pricing power, distribution capability, and/or differentiated technologies and services
  • Bias toward businesses that cater to rising domestic consumer demand

30/04/2013

Inception Date

-13.30%

YTD Return (USD)

(as of 10/08/2022)

$20.34

NAV (USD)

(as of 10/08/2022)

-0.15

1 Day NAV Change

(as of 10/08/2022)

Objective

Seeks to achieve 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 equities of small companies located in the Asia ex Japan Region, and may invest in other permitted assets on worldwide. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI All Country Asia ex Japan Small Cap Index.

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 Fund invests in smaller companies, which are more volatile and less liquid than larger companies.

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

Fund Facts
Inception Date 30/04/2013
Fund Assets $87.42 million (31/07/2022)
Base Currency USD
ISIN: LU0871674296 (USD) LU0871674379 (GBP) LU0871674023 (EUR)
Bloomberg Symbol MATASCI:LX (USD) MATASSI:LX (GBP) MAASCIE:LX (EUR)
Benchmark MSCI All Country Asia ex Japan Small Cap 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 1.00%
Total Expense Ratio As of 31/03/2022 1.15% ( USD ) 1.15% ( GBP ) 1.15% ( EUR )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/07/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
1.31% 1.20% -14.07% -13.10% 17.65% 11.33% n.a. 7.87% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
2.16% -8.56% -18.71% -16.92% 9.44% 4.12% n.a. 3.70%
Matthews Asia Small Companies Fund (GBP)
1.00% 4.57% -4.64% -0.23% 17.73% 13.05% n.a. 12.43% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
1.96% -5.66% -9.53% -5.08% 9.67% 5.80% n.a. 8.13%
Matthews Asia Small Companies Fund (EUR)
3.23% 4.58% -4.63% 1.19% n.a. n.a. n.a. 16.75% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
4.75% -5.40% -9.34% -3.38% n.a. n.a. n.a. 11.67%
As of 30/06/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-3.54% -4.74% -15.17% -11.04% 16.61% 11.71% n.a. 7.80% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-8.75% -14.58% -20.44% -19.67% 7.64% 4.24% n.a. 3.50%
Matthews Asia Small Companies Fund (GBP)
0.27% 3.21% -5.59% 1.84% 18.46% 13.25% n.a. 12.43% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-5.31% -7.39% -11.26% -8.63% 9.33% 5.65% n.a. 7.96%
Matthews Asia Small Companies Fund (EUR)
-0.56% 1.73% -7.61% 1.73% n.a. n.a. n.a. 15.31% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-6.50% -9.09% -13.45% -8.88% n.a. n.a. n.a. 8.95%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014
Matthews Asia Small Companies Fund (USD)
22.19% 46.12% 17.53% -14.53% 30.80% -1.09% -11.08% 11.14%
MSCI All Country Asia ex Japan Small Cap Index (USD)
21.23% 26.60% 7.58% -18.63% 33.84% -2.05% -3.28% 2.56%
Matthews Asia Small Companies Fund (GBP)
23.80% 41.22% 14.03% -9.84% 19.38% 18.87% -6.49% n.a.
MSCI All Country Asia ex Japan Small Cap Index (GBP)
22.35% 22.69% 3.43% -13.57% 22.25% 16.83% 2.32% n.a.
Matthews Asia Small Companies Fund (EUR)
32.41% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
MSCI All Country Asia ex Japan Small Cap Index (EUR)
30.44% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
For the period ended 30/06/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-11.04% 55.78% 14.42% -5.85% 16.52% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-19.67% 62.52% -4.46% -7.69% 6.91%
Matthews Asia Small Companies Fund (GBP)
1.84% 37.86% 18.39% -2.49% 14.96% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-8.63% 45.36% -1.59% -4.24% 5.18%
Matthews Asia Small Companies Fund (EUR)
1.73% n.a. n.a. n.a. n.a. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-8.88% n.a. 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.

Portfolio Characteristics

(as of 31/07/2022)
Fund Benchmark
Number of Positions 60 1,594
Weighted Average Market Cap $4.4 billion $1.7 billion
Active Share 97.6 n.a.
P/E using FY1 estimates 18.0x 11.2x
P/E using FY2 estimates 14.0x 10.2x
Price/Cash Flow 13.1 6.4
Price/Book 2.8 1.3
Return On Equity 6.5 13.3
EPS Growth (3 Yr) -11.0% 9.3%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 30/06/2022)
10.13%
Alpha
0.79
Beta
86.84%
Upside Capture
57.66%
Downside Capture
0.81
Sharpe Ratio
0.77
Information Ratio
11.72%
Tracking Error
69.88

Fund Risk Metrics are reflective of Class I USD ACC shares.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/07/2022)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 6.0
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 5.8
Bandhan Bank, Ltd. Financials India 5.3
Legend Biotech Corp. Health Care United States 5.2
Ecopro BM Co., Ltd. Industrials South Korea 5.0
Phoenix Mills, Ltd. Real Estate India 4.0
Lemon Tree Hotels, Ltd. Consumer Discretionary India 3.1
Silergy Corp. Information Technology China/Hong Kong 2.8
Hugel, Inc. Health Care South Korea 2.4
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 2.3
TOTAL 41.9

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 31/07/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 30.4 15.7 14.7
Financials 14.8 8.9 5.9
Information Technology 13.7 19.6 -5.9
Consumer Discretionary 11.4 12.4 -1.0
Health Care 11.4 9.0 2.4
Real Estate 6.6 9.7 -3.1
Consumer Staples 2.0 4.8 -2.8
Communication Services 0.9 4.5 -3.6
Materials 0.2 11.5 -11.3
Utilities 0.0 2.3 -2.3
Energy 0.0 1.7 -1.7
Cash and Other Assets, Less Liabilities 8.6 0.0 8.6

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 29.6 16.8 12.8
India 28.8 25.6 3.2
South Korea 9.4 16.6 -7.2
Taiwan 6.9 22.8 -15.9
Indonesia 5.2 3.0 2.2
United States 5.2 0.0 5.2
Philippines 2.4 1.1 1.3
Vietnam 2.3 0.0 2.3
Singapore 0.8 6.3 -5.5
Bangladesh 0.8 0.0 0.8
Thailand 0.0 4.3 -4.3
Malaysia 0.0 3.4 -3.4
Cash and Other Assets, Less Liabilities 8.6 0.0 8.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 7.3 0.0 7.3
Mid Cap ($3B-$10B) 38.5 13.4 25.1
Small Cap (under $3B) 45.6 86.6 -41.0
Cash and Other Assets, Less Liabilities 8.6 0.0 8.6

The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI All Country Asia ex Japan Small Cap Index.

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
(as of 28/07/2022)

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

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Commentary

Period ended 30 June 2022

For the first half of 2022, the Matthews Asia Small Companies Fund returned -15.17%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned -20.44% over the same period. For the quarter ending June 30, 2022, the Fund returned -4.74%, while the benchmark returned -14.58%.

Market Environment:

There were mixed fortunes for markets in the first half of the year. Higher-than-expected inflation reads in the U.S. and European Union generated anticipation of a steeper rate hike cycle. The Fed hiked its rate by 75 basis points (0.75%) in its June meeting, the first such move in almost three decades. Also attendant was the view that the steeper pace of tightening may lead to recession. With no end in sight to the Russian invasion of Ukraine, prices in the oil and gas markets remained elevated notwithstanding periodic pullbacks over recessionary concerns.

Still, in China, after several quarters, sentiment has turned a corner with the expectation that regulatory risk has peaked and the Chinese government is taking a more pragmatic approach to its zero COVID policy and aiding economic activity through a stimulus package.

Singapore and Indonesia were the strongest performing markets in Asia in the first six months of the year, while South Korea and Taiwan were the worst. During the second quarter, China/Hong Kong and Indonesia were the strongest while South Korea and the Philippines were the biggest laggards.

Asian currencies weakened against a surging U.S. dollar during the second quarter but have held up relatively well compared to other developed market currencies. The South Korean won and the Thai baht registered some of the biggest depreciations against the U.S. dollar while the Singapore dollar and the Indonesian rupiah did relatively better.

Performance Contributors and Detractors:

On a country basis, India, South Korea and China/Hong Kong were big contributors to relative performance during the first half of 2022. India was primarily driven by stock selection. On the other hand, our stock selection within Taiwan and underweight in Singapore detracted from relative performance.

From a sector perspective, our overweight and good stock selection in industrials and our stock selection in consumer discretionary and health care were the biggest drivers of relative performance, while poor stock selection in information technology was the biggest detractor.

Turning to individual stocks, Ginlong Technologies, a Chinese solar inverter manufacturer, was the biggest contributor to the Fund’s absolute and relative performance in the first six months. Ginlong continues to benefit from the strong growth in the underlying demand for solar power globally and from distributed solar power in particular. The company’s strong performance stemmed from both domestic and overseas markets and it gained further market share. Looking ahead we see strong demand prospects for solar power on the back of reduced raw material pricing pressures in the supply chain compared to last year. This should benefit the company alongside the progress it is making in the commercial and industrial space as well as with utility projects and storage inverters. On the other hand, technology holdings such as Silergy, Formosa Sumco Technology and Andes Technology detracted from performance due to rotation away from companies that derive a significant part of their value from growth in the long term. Such stocks face a headwind in a sharply rising interest-rate environment and near-term concerns about the semiconductor demand outlook in light of growing worries about softness in economic growth.

Notable Portfolio Changes:

During the second quarter we initiated positions including Hainan Meilan International Airport, a leading operator that serves Haikou, the capital city of Hainan island province in China. Hainan island is a major tourist destination in China and Haikou airport is a major gateway to the island. We expect the pent-up domestic tourism demand to be strong as China’s government takes a more pragmatic approach to implementing its zero COVID policy while outbound international tourism take off might be a few quarters away pending large-scale mRNA vaccination rollout in China. Meilan Airport has a strong duty-free revenue exposure given it has China’s largest duty-free store area and is expected to benefit from the opening of a new terminal that doubled the airport’s passenger handling capacity both from aeronautical and non-aeronautical revenue lines. The stock was available at very attractive valuations amid COVID-19 related lockdowns in Shanghai and Beijing during the quarter.

We exited positions such as Hua Hong Semiconductor—which was a source of cash to fund other promising ideas.

Outlook:

The pace and scope of the Fed’s interest-rate hikes and quantitative tightening and the market’s expectation of its evolution remain the most important variables to watch and will have near-term implications for regional, sector and style performance. Russia’s invasion of Ukraine and its impact on  energy prices also needs careful monitoring.

Overall, the impact of weak external balances and strongly depreciating currencies in addition to rampant inflation in soft and industrial commodities and energy have led to severe stress in frontier countries like Sri Lanka. But generally, larger emerging markets in Asia seem to be reasonably well placed to weather the storm. We believe there is sufficient liquidity. In many parts of Asia, the COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters led by a pickup in the services sector.

From a portfolio standpoint, we will look to maintain a balance between growth and value exposure while staying broadly diversified across sectors and countries in the region. We remain watchful about the impact of input inflation and potentially slower economic growth on corporate earnings for the rest of the year and into 2023. Barring another serious pandemic wave or a major recession, we believe small companies in Asia are poised to grow and are available at attractive valuations.

 

 

Rolling 12 Month Returns For the period ended 30/06/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-11.04% 55.78% 14.42% -5.85% 16.52% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-19.67% 62.52% -4.46% -7.69% 6.91%
Matthews Asia Small Companies Fund (GBP)
1.84% 37.86% 18.39% -2.49% 14.96% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-8.63% 45.36% -1.59% -4.24% 5.18%
Matthews Asia Small Companies Fund (EUR)
1.73% N.A. N.A. N.A. N.A. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-8.88% 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. 

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