TOP

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

5.78%

YTD Return (USD)

(as of 04/10/2023)

$21.22

NAV (USD)

(as of 04/10/2023)

-0.07

1 Day NAV Change

(as of 04/10/2023)

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 $191.69 million (31/08/2023)
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
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 31/08/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-4.80% 5.31% 8.77% 8.29% 12.32% 11.40% 9.26% 7.84% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-1.14% 9.02% 14.63% 10.82% 9.58% 5.94% 5.68% 4.53%
Matthews Asia Small Companies Fund (GBP)
-3.43% 2.67% 3.22% -0.73% 14.20% 11.93% n.a. 11.34% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
0.38% 6.63% 8.82% 1.76% 11.61% 6.48% n.a. 8.08%
Matthews Asia Small Companies Fund (EUR)
-3.35% 3.51% 6.83% -0.31% n.a. n.a. n.a. 10.30% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
0.43% 7.08% 12.72% 2.67% n.a. n.a. n.a. 9.16%
As of 30/06/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
3.28% 1.57% 6.68% 7.54% 14.22% 9.93% 8.37% 7.77% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
3.79% 4.27% 9.14% 9.83% 12.76% 4.80% 5.00% 4.10%
Matthews Asia Small Companies Fund (GBP)
0.94% -0.63% 1.48% 3.00% 13.08% 10.79% n.a. 11.36% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
1.18% 1.41% 3.26% 4.92% 11.70% 5.60% n.a. 7.62%
Matthews Asia Small Companies Fund (EUR)
1.59% 1.67% 4.85% 2.99% n.a. n.a. n.a. 10.21% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
1.42% 3.83% 6.76% 5.25% n.a. n.a. n.a. 7.45%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews Asia Small Companies Fund (USD)
-14.49% 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)
-19.93% 21.23% 26.60% 7.58% -18.63% 33.84% -2.05% -3.28% 2.56%
Matthews Asia Small Companies Fund (GBP)
-4.17% 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)
-9.84% 22.35% 22.69% 3.43% -13.57% 22.25% 16.83% 2.32% n.a.
Matthews Asia Small Companies Fund (EUR)
-9.25% 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)
-14.68% 30.44% n.a. n.a. n.a. 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 Small Companies Fund (USD)
7.54% -11.04% 55.78% 14.42% -5.85% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
9.83% -19.67% 62.52% -4.46% -7.69%
Matthews Asia Small Companies Fund (GBP)
3.00% 1.84% 37.86% 18.39% -2.49% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
4.92% -8.63% 45.36% -1.59% -4.24%
Matthews Asia Small Companies Fund (EUR)
2.99% 1.73% n.a. n.a. n.a. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
5.25% -8.88% 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 31/08/2023)
Fund Benchmark
Number of Positions 66 1,651
Weighted Average Market Cap $4.2 billion $2.5 billion
Active Share 97.8 n.a.
P/E using FY1 estimates 16.6x 14.6x
P/E using FY2 estimates 13.5x 12.3x
Price/Cash Flow 11.6 7.4
Price/Book 2.4 1.5
Return On Equity 10.5 12.5
EPS Growth (3 Yr) 26.7% 22.3%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 31/08/2023)
4.05%
Alpha
0.85
Beta
82.08%
Upside Capture
66.36%
Downside Capture
0.60
Sharpe Ratio
0.25
Information Ratio
10.91%
Tracking Error
64.49

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/08/2023)
Name Sector Country % Net Assets
Shriram Finance, Ltd. Financials India 6.7
Bandhan Bank, Ltd. Financials India 6.5
Legend Biotech Corp. Health Care China/Hong Kong 5.1
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 4.0
Hugel, Inc. Health Care South Korea 3.5
Finolex Cables, Ltd. Industrials India 2.5
Phoenix Mills, Ltd. Real Estate India 2.5
Airtac International Group Industrials China/Hong Kong 2.5
Elite Material Co., Ltd. Information Technology Taiwan 2.2
Zhihu, Inc. Communication Services China/Hong Kong 2.1
TOTAL 37.6

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
Industrials 26.0 16.2 9.8
Information Technology 20.1 20.4 -0.3
Financials 14.9 9.5 5.4
Health Care 14.0 9.0 5.0
Consumer Discretionary 12.5 10.7 1.8
Real Estate 5.2 7.5 -2.3
Consumer Staples 2.3 4.7 -2.4
Communication Services 2.1 4.5 -2.4
Materials 0.0 13.7 -13.7
Utilities 0.0 2.3 -2.3
Energy 0.0 1.5 -1.5
Cash and Other Assets, Less Liabilities 2.8 0.0 2.8

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 34.4 13.5 20.9
India 29.0 29.8 -0.8
Taiwan 13.5 23.9 -10.4
South Korea 8.1 17.7 -9.6
Philippines 4.1 1.0 3.1
Vietnam 3.5 0.0 3.5
Indonesia 2.3 2.5 -0.2
Thailand 1.6 3.9 -2.3
Bangladesh 0.5 0.0 0.5
United States 0.3 0.0 0.3
Singapore 0.0 4.9 -4.9
Malaysia 0.0 2.9 -2.9
Cash and Other Assets, Less Liabilities 2.8 0.0 2.8

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 1.9 -1.9
Large Cap ($10B-$25B) 6.8 0.0 6.8
Mid Cap ($3B-$10B) 43.8 19.6 24.2
Small Cap (under $3B) 46.6 78.4 -31.8
Cash and Other Assets, Less Liabilities 2.8 0.0 2.8

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
  • 10 YEAR
(as of 24/07/2023)

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 ©2023 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 2023

For the first half of 2023, the Matthews Asia Small Companies Fund returned 6.68%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned 9.14% over the same period. For the quarter ending 30 June 2023, the Fund returned 1.57%, while the benchmark returned 4.27%.

Market Environment:   

There were two key developments during the first six months of the year. Firstly, the market has been surprised by the persistence of higher inflation and as a result peak interest rate expectations in the western world have been steadily revised up. Secondly, there was the market’s excitement about the potential of artificial intelligence (AI), with the release of very successful, large language and stable diffusion models and blowout quarterly results and guidance from NVIDIA, a key player in the space, which together triggered a reassessment of the growth prospects of large tech companies. This led to a very top-heavy performance of equity markets, in the U.S. in particular.

During the period, the relative attractiveness of Asian markets with low inflation came into focus, such as South Korea and Taiwan. Some currencies in the region also did well against the U.S. dollar, including the Indonesian rupiah and the Philippine peso, while the Malaysian ringgit and the Chinese renminbi were among the biggest depreciators against the greenback.

Taiwan, South Korea and India were the best-performing markets in the region in the first half, according to the Fund’s benchmark, the MSCI All Country Asia ex Japan Small Cap Index, while Thailand and China were the worst performers. From a sector perspective, information technology (IT), materials and industrials were the best performers while energy, real estate and consumer staples were the weakest.

Performance Contributors and Detractors:

From a country perspective, stock selection in South Korea was the biggest contributor to relative performance in the first half, followed by stock selection in India. Our underweight to Thailand also contributed. On the other hand, our overweight to China was the biggest detractor amid negative sentiment over the country’s uneven economy recovery and geopolitical tensions. Our underweight to Taiwan was also a detractor.

At the sector level, stock selection in financials was the top contributor while our underweight and stock selections in consumer staples and real estate also contributed. On the flip side, stock selection in IT and lack of exposure to materials were the biggest detractors. 

At the holdings level, Ecopro BM, a South-Korea-based manufacturer of high-nickel cathode materials for renewable batteries, was the biggest contributor to relative and absolute performance in the first half as the company benefited from strong order growth from key customers, particularly in the U.S.

Shriram Finance, an India-based auto and consumer finance services provider, was also a strong contributor as the outlook for both loan growth and margins for non-banking financial companies continued to improve with the bulk of interest rate-hikes likely behind us.

On the flip side, our Chinese or China-exposed holdings such as Silergy, a Taiwanese analog semiconductor company, Hugel, a South Korean botulin toxin maker, and Hainan Meilan International Airport, a Chinese airport operator, were among the biggest detractors as the market worried about the slow pace of the Chinese economic recovery. We remain positive about the long-term prospects of these companies and our base case remains a steady, not spectacular, improvement in China’s economy over the coming quarters.

Notable Portfolio Changes:

In the last quarter, we initiated a position in Elite Material, a Taiwanese copper clad laminate (CCL) and printed circuit board prepreg company. It is a leading supplier of halogen free CCL. It is well positioned to benefit from the trend of increasing substrate density and layer count for advanced server platforms, artificial intelligence servers and advanced networking equipment that require very low to extremely low loss materials.

In the period we exited Lemon Tree, an Indian mid-market hotel chain operator, to take profits, and sold our position in Bank Tabungan Negara in Indonesia to deploy capital elsewhere.

Outlook:

The U.S. Fed’s interest rate strategy and the market’s expectation of its evolution were the most important variables impacting the performance of markets over the last few quarters. With the Fed seemingly coming close to the end of the interest rate hiking cycle, the focus will now shift to assessing the cumulate impact of all the rate hikes on economic growth prospects over the coming quarters.

Like during the first half, our focus in the second half of 2023 will be on assessing how China’s economic recovery and growth prospects play out and how they might affect the dynamics of other markets. And Russia’s invasion of Ukraine and its effect on energy prices—alongside OPEC’s (Organization of the Petroleum Exporting Countries) persistent efforts to keep the prices high—will need ongoing, careful monitoring; although to a lesser extent than in 2022.

Over the coming years, we expect the gross domestic product (GDP) growth-differential between Asian emerging markets and developed markets to improve. This development, alongside relatively attractive valuations, should potentially lend support to better equity performance against developed markets compared with the last decade.

As the global economy wades through a tricky 2023, we believe small companies in Asian markets offer long-term growth opportunities given their innovation and domestic consumption orientation. We continue to find quality businesses at attractive valuations in this asset class.

 

Rolling 12 Month Returns For the period ended 30/06/2023 - I (Acc)
Name 2023 2022 2021 2020 2019 Inception Date
Matthews Asia Small Companies Fund (USD)
7.54% -11.04% 55.78% 14.42% -5.85% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
9.83% -19.67% 62.52% -4.46% -7.69%
Matthews Asia Small Companies Fund (GBP)
3.00% 1.84% 37.86% 18.39% -2.49% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
4.92% -8.63% 45.36% -1.59% -4.24%
Matthews Asia Small Companies Fund (EUR)
2.99% 1.73% N.A. N.A. N.A. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
5.25% -8.88% 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. 

Index Definitions