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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

3.29%

YTD Return (USD)

(as of 28/03/2023)

$20.72

NAV (USD)

(as of 28/03/2023)

-0.17

1 Day NAV Change

(as of 28/03/2023)

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 $126.58 million (28/02/2023)
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
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As of 28/02/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
-2.19% 4.95% 4.74% -1.50% 18.08% 9.59% n.a. 7.84% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-2.85% 3.20% 3.54% -9.89% 11.71% 2.03% n.a. 3.69%
Matthews Asia Small Companies Fund (GBP)
-0.54% 4.09% 4.13% 9.04% 20.56% 12.54% n.a. 12.14% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-1.21% 1.51% 2.88% -0.13% 13.72% 4.70% n.a. 7.87%
Matthews Asia Small Companies Fund (EUR)
-0.23% 2.48% 5.26% 3.90% n.a. n.a. n.a. 12.08% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-0.51% 0.19% 4.20% -4.56% n.a. n.a. n.a. 7.44%
As of 31/12/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Small Companies Fund (USD)
0.20% 10.77% -14.49% -14.49% 15.15% 8.93% n.a. 7.46% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-0.33% 8.76% -19.93% -19.93% 7.12% 1.47% n.a. 3.38%
Matthews Asia Small Companies Fund (GBP)
-0.04% 1.65% -4.17% -4.17% 18.77% 11.49% n.a. 11.86% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-1.32% 0.93% -9.84% -9.84% 10.62% 3.88% n.a. 7.67%
Matthews Asia Small Companies Fund (EUR)
-2.64% 1.16% -9.25% -9.25% n.a. n.a. n.a. 10.26% 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-3.84% -0.17% -14.68% -14.68% n.a. n.a. n.a. 5.87%
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 31/12/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-14.49% 22.19% 46.12% 17.53% -14.53% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-19.93% 21.23% 26.60% 7.58% -18.63%
Matthews Asia Small Companies Fund (GBP)
-4.17% 23.80% 41.22% 14.03% -9.84% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-9.84% 22.35% 22.69% 3.43% -13.57%
Matthews Asia Small Companies Fund (EUR)
-9.25% 32.41% n.a. n.a. n.a. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-14.68% 30.44% 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 28/02/2023)
Fund Benchmark
Number of Positions 68 1,574
Weighted Average Market Cap $4.0 billion $1.8 billion
Active Share 97.8 n.a.
P/E using FY1 estimates 18.1x 12.5x
P/E using FY2 estimates 15.1x 11.8x
Price/Cash Flow 11.5 6.4
Price/Book 2.5 1.3
Return On Equity 9.4 12.8
EPS Growth (3 Yr) 6.2% 14.9%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 28/02/2023)
7.57%
Alpha
0.85
Beta
87.97%
Upside Capture
68.63%
Downside Capture
0.78
Sharpe Ratio
0.56
Information Ratio
11.37%
Tracking Error
75.94

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 28/02/2023)
Name Sector Country % Net Assets
Ecopro BM Co., Ltd. Industrials South Korea 6.0
Bandhan Bank, Ltd. Financials India 5.8
Shriram Finance, Ltd. Financials India 5.0
Silergy Corp. Information Technology China/Hong Kong 4.5
Legend Biotech Corp. Health Care United States 3.7
Hugel, Inc. Health Care South Korea 3.0
Poya International Co., Ltd. Consumer Discretionary Taiwan 2.8
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 2.8
Airtac International Group Industrials China/Hong Kong 2.7
Andes Technology Corp. Information Technology Taiwan 2.7
TOTAL 39.0

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 28/02/2023)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 29.5 15.6 13.9
Information Technology 21.6 19.7 1.9
Health Care 13.8 9.5 4.3
Financials 13.8 8.8 5.0
Consumer Discretionary 11.7 11.8 -0.1
Real Estate 6.1 8.9 -2.8
Communication Services 1.9 4.6 -2.7
Consumer Staples 1.6 5.1 -3.5
Materials 0.0 11.8 -11.8
Utilities 0.0 2.4 -2.4
Energy 0.0 1.8 -1.8
Cash and Other Assets, Less Liabilities 0.0 0.0 0.0

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 36.2 17.9 18.3
India 21.1 24.4 -3.3
Taiwan 12.9 24.0 -11.1
South Korea 12.1 16.1 -4.0
Philippines 4.2 1.3 2.9
United States 4.1 0.0 4.1
Indonesia 3.7 2.9 0.8
Vietnam 3.1 0.0 3.1
Thailand 1.2 4.5 -3.3
Singapore 0.7 5.6 -4.9
Bangladesh 0.7 0.0 0.7
Malaysia 0.0 3.3 -3.3
Cash and Other Assets, Less Liabilities 0.0 0.0 0.0

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) 6.0 0.0 6.0
Mid Cap ($3B-$10B) 42.3 14.4 27.9
Small Cap (under $3B) 51.7 85.6 -33.9
Cash and Other Assets, Less Liabilities 0.0 0.0 0.0

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 23/01/2023)

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 31 December 2022

For the year ending 31 December 2022, the Matthews Asia Small Companies Fund returned -14.49%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index returned -19.93%. For the fourth quarter of the year, the Fund returned 10.77% versus 8.76% for the benchmark.

Market Environment:

In 2022, the U.S. and many other parts of the developed world saw high rates of inflation that they hadn’t experienced since the 1980s. The U.S. Federal Reserve increased the Fed funds rate seven times last year after guiding for a transitory inflation for much of 2021. This led to strong U.S. dollar performance that peaked around the end of the third quarter.

Inflation was less of a challenge in key emerging markets like China, partly because of suppressed economic activity resulting from China’s zero COVID policy which was in place for much of 2022, and because where inflation was elevated, a number of central banks proactively addressed it by sharply increasing rates.

Nonetheless, Asia emerging markets currencies were not completely immune to the impact of a very strong greenback. The Hong Kong dollar, Thai baht and Malaysian Ringgit were the least affected against the dollar last year while the Indian rupee, Taiwanese dollar and Philippine peso were the worst performers. For perspective, some major developed market currencies, such as the Japanese yen and British pound, fared worse than some Asia market currencies.

For the year, Thailand was the best-performing Asia small-cap emerging market, followed by India and Malaysia. On the other hand, South Korea, Taiwan and China/Hong Kong were the worst-performers. These poor performers turned in robust performances in the fourth quarter as they were aided by China’s lifting of its pandemic restrictions and on the hopes of technology supply chain inventory potentially nearing its peak.             

Performance Contributors and Detractors: 

On a country basis, our stock selection in India was the biggest contributor to relative performance during the year, followed by our overweight and stock selection in Indonesia. Our underweight allocation to Taiwan and South Korea also helped performance. On the other hand, our stock selection in China/Hong Kong detracted from performance though that was mitigated by our overweight position.

From a sector perspective, our stock selection in consumer discretionary was the biggest contributor to relative performance during the year. Our overweight and stock selection in industrials was also a top contributor. Additionally, stock selections in health care and real estate were strong contributors. On the flip side, stock selection in information technology was the biggest detractor. 

At the stock level, our Indian holdings benefited from the normalization of economic activity in the country. Lemon Tree Hotels and Phoenix Mills, a retail mall operator, were top contributors as they gained from higher sales and stronger pricing respectively compared with pre-pandemic levels. Shriram Finance, an Indian non-banking financial company, also benefited from economic normalization and loan growth resumption. In Indonesia, as the economy as well as mall foot traffic normalized, Mitra Adiperkasa, a retailer with a broad exposure to discretionary consumer spending, was also a top performer. On the other hand, Taiwan technology holding Silergy was the largest detractor. Concerns over a post-COVID global consumer softening in demand for consumer appliances and communications products, in addition to general weakness in Chinese economic activity, proved to be a drag on stock performance. The broader build up in semiconductor inventory globally also contributed to negative sentiment toward the technology sector in general. We continue to like the long-term prospects of Silergy and its positioning in the analog semiconductor industry.

Notable Portfolio Changes:

In the last quarter we initiated a new position in Tongcheng Travel Holdings, a Chinese online travel agency. We expect the company to benefit from a recovery in tourism as well as easing mobility restrictions in China. Higher savings and pent-up demand for travel after a long period of China’s zero COVID policy should aid demand. The company has a strong lower-tier presence and China business. It has been making concerted efforts to increase its exposure to the international package travel area and while that is a relatively smaller proportion of its business, these efforts should aid further growth over the long term.

Outlook:

The Fed’s interest rate strategy and the market’s expectation of its evolution continue to be the most important variables impacting the near-term regional, sector and currency performance in emerging markets. We expect the impact of Fed’s actions in 2023 to be less than it was in 2022 as the tightening cycle enters late stages. In addition, we are also wary of the cumulative impact of the Fed’s interest rate hikes on U.S. and developed world economic activity.

Our other key focus in 2022 was the evolution of China’s zero-COVID policy and its impact on economic activity in the country. This has largely been resolved given the unexpected lifting of most COVID restrictions in China in late 2022. Elsewhere, Russia’s invasion of Ukraine and its effect on energy prices— alongside OPEC’s efforts to keep the prices high—needs careful watching, especially as Chinese economic activity is likely to pick up as 2023 progresses.

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 reached in 2022. 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 embarks on a likely tricky 2023, we believe small companies in Asian emerging markets 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 31/12/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Small Companies Fund (USD)
-14.49% 22.19% 46.12% 17.53% -14.53% 30/04/2013
MSCI All Country Asia ex Japan Small Cap Index (USD)
-19.93% 21.23% 26.60% 7.58% -18.63%
Matthews Asia Small Companies Fund (GBP)
-4.17% 23.80% 41.22% 14.03% -9.84% 30/04/2014
MSCI All Country Asia ex Japan Small Cap Index (GBP)
-9.84% 22.35% 22.69% 3.43% -13.57%
Matthews Asia Small Companies Fund (EUR)
-9.25% 32.41% N.A. N.A. N.A. 30/12/2020
MSCI All Country Asia ex Japan Small Cap Index (EUR)
-14.68% 30.44% 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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