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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

-11.47%

YTD Return (USD)

(as of 05/12/2022)

$20.77

NAV (USD)

(as of 05/12/2022)

+0.30

1 Day NAV Change

(as of 05/12/2022)

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 $81.56 million (31/10/2022)
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 31/10/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-2.82% -12.70% -24.98% -25.71% 10.74% 7.57% n.a. 6.13% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-2.87% -12.03% -28.49% -27.50% 4.39% 0.18% n.a. 2.22%
Matthews Asia Small Companies Fund (GBP)
-6.73% -7.80% -12.08% -10.95% 15.21% 10.64% n.a. 10.97% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-5.83% -7.02% -15.87% -13.68% 8.55% 3.08% n.a. 6.96%
Matthews Asia Small Companies Fund (EUR)
-4.41% -10.09% -14.25% -12.62% n.a. n.a. n.a. 7.86% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-3.72% -9.24% -17.72% -15.11% n.a. n.a. n.a. 4.33%
As of 30/09/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-10.12% -8.99% -22.80% -20.74% 12.91% 8.42% n.a. 6.51% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-11.11% -7.47% -26.38% -24.40% 6.74% 1.71% n.a. 2.55%
Matthews Asia Small Companies Fund (GBP)
-5.39% -0.15% -5.73% -3.45% 17.07% 12.68% n.a. 12.01% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-7.35% 0.67% -10.67% -8.69% 10.32% 5.52% n.a. 7.79%
Matthews Asia Small Companies Fund (EUR)
-7.75% -2.91% -10.30% -5.87% n.a. n.a. n.a. 11.08% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-8.76% -1.25% -14.54% -10.57% n.a. n.a. n.a. 6.84%
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 30/09/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-20.74% 47.90% 22.81% 3.71% 0.33% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-24.40% 41.35% 13.83% -8.40% -2.33%
Matthews Asia Small Companies Fund (GBP)
-3.45% 41.02% 17.84% 9.98% 2.94% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-8.69% 35.53% 8.50% -3.06% 0.48%
Matthews Asia Small Companies Fund (EUR)
-5.87% n.a. n.a. n.a. n.a. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-10.57% 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 31/10/2022)
Fund Benchmark
Number of Positions 65 1,593
Weighted Average Market Cap $3.2 billion $1.6 billion
Active Share 97.4 n.a.
P/E using FY1 estimates 17.2x 10.7x
P/E using FY2 estimates 13.6x 10.0x
Price/Cash Flow 12.1 5.9
Price/Book 2.4 1.2
Return On Equity 7.4 13.4
EPS Growth (3 Yr) -10.0% 11.6%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 31/10/2022)
7.03%
Alpha
0.82
Beta
83.09%
Upside Capture
67.57%
Downside Capture
0.49
Sharpe Ratio
0.54
Information Ratio
11.70%
Tracking Error
72.33

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/10/2022)
Name Sector Country % Net Assets
Legend Biotech Corp. Health Care United States 6.1
Shriram City Union Finance, Ltd. Financials India 5.8
Bandhan Bank, Ltd. Financials India 5.3
Ecopro BM Co., Ltd. Industrials South Korea 4.9
Phoenix Mills, Ltd. Real Estate India 4.4
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.3
Lemon Tree Hotels, Ltd. Consumer Discretionary India 3.2
Hugel, Inc. Health Care South Korea 2.8
Airtac International Group Industrials China/Hong Kong 2.5
Silergy Corp. Information Technology China/Hong Kong 2.5
TOTAL 40.8

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 31/10/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 29.4 15.9 13.5
Financials 15.0 9.6 5.4
Consumer Discretionary 14.9 13.0 1.9
Information Technology 13.8 18.4 -4.6
Health Care 13.4 8.9 4.5
Real Estate 7.2 8.8 -1.6
Consumer Staples 2.9 4.8 -1.9
Communication Services 1.3 4.3 -3.0
Materials 0.4 11.9 -11.5
Utilities 0.0 2.5 -2.5
Energy 0.0 1.9 -1.9
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Country Fund Benchmark Difference
India 32.6 30.1 2.5
China/Hong Kong 27.2 14.3 12.9
Taiwan 8.8 21.8 -13.0
South Korea 8.7 15.2 -6.5
United States 6.3 0.0 6.3
Indonesia 6.1 3.2 2.9
Philippines 3.1 1.1 2.0
Vietnam 2.3 0.0 2.3
Thailand 1.5 4.6 -3.1
Bangladesh 1.0 0.0 1.0
Singapore 0.6 6.0 -5.4
Malaysia 0.0 3.5 -3.5
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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) 0.0 0.0 0.0
Mid Cap ($3B-$10B) 45.1 12.9 32.2
Small Cap (under $3B) 53.3 87.1 -33.8
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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 ©2022 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 September 2022

For the quarter ending 30 September 2022, the Matthews Asia Small Companies Fund returned -8.99%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned -7.47%.

Market Environment:

Global interest rates in general, and U.S. 10-year yields in particular, continued their northward journey in the third quarter after a strong pick up in the first two quarters of the year. U.S. 10-year yields gained about 1.25% from early August to the end of September after a worse-than-expected inflation print. China was a notable exception to this trend, where yields were lower at the end of the third quarter than they were at the beginning of the year due to a lack of domestic inflationary pressure and the impact of the country’s zero-COVID policy and stressed real estate market on economic activity.

During the quarter the MSCI All Country Asia ex Japan Small Cap Index meaningfully outperformed the broader MSCI All Country Asia ex Japan Index, helped by a strong performance from small-cap equities in India. China, South Korea and Taiwan were the worst-performing small-cap emerging markets.

Asian currencies had a challenging quarter as jumbo rate rises by the Federal Reserve designed to contain inflation contributed to a very strong U.S. dollar environment. The Hong Kong dollar, Indonesian rupiah and Indian rupee were the best-performing currencies in the period while the South Korean won, Taiwanese dollar and Thai baht were the worst performers. To add perspective, some major developed market currencies, such as the British pound, the euro and the Japanese yen, fared worse than some Asian currencies in the period.

Performance Contributors and Detractors:

On a country basis, our underweight and stock selection in Taiwan was the biggest contributor to relative performance. Our overweight in India also contributed to performance. While our overweight in China was the biggest detractor to relative performance it was mitigated by our stock selection. Our underweight in South Korea mitigated the negative impact of our stock selection in the market.

From a sector perspective, our stock selection in consumer discretionary and real estate were the biggest contributors to relative performance. Our stock selection in industrials was the biggest detractor though it was somewhat mitigated by our overweight position in the sector. Stock selection in health care was also a big detractor.

At the stock level, our Indian holdings benefited from the normalization of economic activity in the country. Phoenix Mills, a retail mall operator, and Lemon Tree Hotels were top contributors as they gained from higher sales and stronger pricing, respectively, compared with pre-pandemic levels. Our Taiwan technology holdings Andes Technology and M31 Technology recovered from the sell-off earlier in the year and were also strong contributors.

On the other hand, holdings that have significant exposure to China such as Airtac International and Silergy were the biggest detractors. Persistent fears about softening economic activity in China tied to its zero-COVID restrictions, challenges in the country’s real-estate market and geo-political concerns over perceived closeness to Russia and ongoing frictions with the U.S. all contributed negatively to market sentiment. While our overweight allocation to China has been a drag on performance, we continue to believe these names have potential to do well in the long term given their market positioning. In addition, as and when the zero-COVID policy normalizes over the coming quarters and economic activity rebounds, we expect market sentiment to likely improve.

Notable Portfolio Changes:

There was limited trading activity during the quarter. We initiated a position in Siam Wellness, a leading Thai spa operator. We expect the company to benefit from a recovery in tourism as well as easing mobility restrictions in Thailand. In our view, Siam will be able to reopen more branches and bring back more therapists as tourism traffic normalizes. China tourists were a meaningful part of the company’s client base before the pandemic and Siam stands to benefit from any resumption in outbound tourism from China. Among holdings we exited were South Korean regional banks DGB Financial Group and BNK Financial Group as we turned cautious about a potential credit cycle in South Korea due to higher interest rates and its potential impact on property development sector balance sheets, among others.

Outlook:

The Fed’s interest rate strategy and the market’s expectation of its evolution remain the most important variables impacting near-term regional, sector and currency performance in Asia. In addition, we are wary of the impact of the Fed’s interest rate approach on U.S. and global economic activity.

Our other key focus is on China’s zero-COVID policy and its ongoing impact on economic activity. Russia’s invasion of Ukraine and its effect on energy prices (alongside OPEC’s efforts to keep the prices high) also needs careful watching. We expect corporate earnings to moderate in 2022 and we’re mindful about the impact of potentially slowing economic growth on 2023 earnings estimates.

This all said, over the coming years we expect the emerging markets gross domestic product (GDP) growth differential with developed markets to improve from a 23-year low in 2022. This, alongside relatively attractive valuations, should potentially lend support to better equity performance against developed markets compared with the last decade.

From a portfolio standpoint, we will look to maintain a balance between different style factors while staying broadly diversified across sectors and countries. As the global economy embarks on a post-pandemic recovery path while contending with macro and external headwinds, we believe small companies will continue to offer long-term growth opportunities given their innovation and domestic consumption orientation. There are also currently quality businesses at attractive valuations in this asset class.

Rolling 12 Month Returns For the period ended 30/09/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-20.74% 47.90% 22.81% 3.71% 0.33% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-24.40% 41.35% 13.83% -8.40% -2.33%
Matthews Asia Small Companies Fund (GBP)
-3.45% 41.02% 17.84% 9.98% 2.94% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-8.69% 35.53% 8.50% -3.06% 0.48%
Matthews Asia Small Companies Fund (EUR)
-5.87% N.A. N.A. N.A. N.A. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-10.57% 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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