Matthews China Small Companies Fund

  • Seeks alpha in China’s lesser known small entrepreneurial companies
  • Invests in industries that are leveraged to China’s increasingly innovative and dynamic economy driven by fast growing domestic consumer demand
  • Tilt towards higher value-added growth sectors benefiting from innovation and capital efficiency


Inception Date


YTD Return (USD)

(as of 31/03/2023)



(as of 31/03/2023)


1 Day NAV Change

(as of 31/03/2023)


Seeks to achieve long term capital appreciation.


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 China, and may invest the remainder of its net assets 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 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 China Small Cap Index.


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. 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. 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. 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 29/02/2012
Fund Assets $356.97 million (28/02/2023)
Base Currency USD
ISIN: LU0721876877 (USD) LU2075925870 (GBP)
Benchmark MSCI China Small Cap Index
Geographic Focus China and Taiwan: China includes its administrative and other districts, such as Hong Kong.
Fees & Expenses
Management Fee 1.00%
Total Expense Ratio As of 31/03/2022 1.25% ( USD ) 1.25% ( GBP )


  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
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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 China Small Companies Fund (USD)
-8.03% 2.68% 1.28% -21.71% 2.23% 4.47% 9.41% 8.81% 29/02/2012
MSCI China Small Cap Index (USD)
-8.71% 8.92% 1.82% -14.42% -2.05% -5.14% 0.29% 1.26%
Matthews China Small Companies Fund (GBP)
-6.51% 1.77% 0.64% -13.43% 4.37% n.a. n.a. 7.88% 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
-7.17% 7.14% 1.17% -5.15% -0.29% n.a. n.a. 1.20%
As of 31/12/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Small Companies Fund (USD)
1.38% 11.31% -30.72% -30.72% 6.14% 4.99% 10.12% 8.82% 29/02/2012
MSCI China Small Cap Index (USD)
6.97% 21.39% -24.77% -24.77% -3.55% -5.10% 1.00% 1.11%
Matthews China Small Companies Fund (GBP)
1.13% 2.20% -22.34% -22.34% n.a. n.a. n.a. 8.10% 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
5.90% 12.65% -15.29% -15.29% n.a. n.a. n.a. 0.87%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews China Small Companies Fund (USD)
-30.72% -2.88% 77.70% 31.36% -18.79% 56.47% -1.96% 2.98% -3.20% 34.42%
MSCI China Small Cap Index (USD)
-24.77% -6.26% 27.21% 6.63% -19.53% 24.62% -5.95% 3.48% -0.34% 18.68%
Matthews China Small Companies Fund (GBP)
-22.34% -1.58% n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
MSCI China Small Cap Index - GBP (GBP)
-15.29% -5.39% n.a. 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 China Small Companies Fund (USD)
-30.72% -2.88% 77.70% 31.36% -18.79% 29/02/2012
MSCI China Small Cap Index (USD)
-24.77% -6.26% 27.21% 6.63% -19.53%
Matthews China Small Companies Fund (GBP)
-22.34% -1.58% n.a. n.a. n.a. 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
-15.29% -5.39% n.a. n.a. n.a.

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

Unusually high returns may not be sustainable.

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 64 225
Weighted Average Market Cap $5.1 billion $1.5 billion
Active Share 94.1 n.a.
P/E using FY1 estimates 19.4x n.a.
P/E using FY2 estimates 16.0x 8.2x
Price/Cash Flow 14.8 4.8
Price/Book 2.7 0.8
Return On Equity 9.2 3.3
EPS Growth (3 Yr) 13.5% 4.5%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 28/02/2023)
Upside Capture
Downside Capture
Sharpe Ratio
Information Ratio
Tracking Error

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 28/02/2023)
Name Sector % Net Assets
China Overseas Property Holdings, Ltd. Real Estate 3.9
Morimatsu International Holdings Co., Ltd. Industrials 2.9
KE Holdings, Inc. Real Estate 2.9
BOE Varitronix, Ltd. Information Technology 2.8
Melco International Development, Ltd. Consumer Discretionary 2.8
ENN Natural Gas Co., Ltd. Utilities 2.7
Yadea Group Holdings, Ltd. Consumer Discretionary 2.7
Alchip Technologies, Ltd. Information Technology 2.4
Chailease Holding Co., Ltd. Financials 2.3
Zhejiang Shuanghuan Driveline Co., Ltd. Consumer Discretionary 2.3
TOTAL 27.7

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
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Industrials 24.3 9.9 14.4
Information Technology 18.1 10.0 8.1
Consumer Discretionary 16.8 14.1 2.7
Health Care 13.1 22.6 -9.5
Real Estate 9.1 13.2 -4.1
Consumer Staples 6.1 3.8 2.3
Financials 3.4 6.7 -3.3
Communication Services 2.8 7.1 -4.3
Utilities 2.7 4.0 -1.3
Materials 2.2 7.3 -5.1
Energy 0.0 1.4 -1.4
Cash and Other Assets, Less Liabilities 1.4 0.0 1.4

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 7.7 0.0 7.7
Mid Cap ($3B-$10B) 53.6 4.6 49.0
Small Cap (under $3B) 37.3 95.4 -58.1
Cash and Other Assets, Less Liabilities 1.4 0.0 1.4

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 China Small Cap Index.

China Exposure Portfolio Weight
A Shares 35.7
SAR (Hong Kong) 27.1
H Shares 10.1
Overseas Listed Companies (OL) 8.0
China-affiliated corporations (CAC) 7.5
Unassigned 10.2
Cash and Other Assets, Less Liabilities 1.4

Definitions: SAR (Hong Kong) 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. China 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

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.


  • 3 YEAR
  • 5 YEAR
  • 10 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

Winnie  Chwang photo
Winnie Chwang

Lead Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager


Period ended 31 December 2022

For the year ending 31 December 2022, the Matthews China Small Companies Fund returned -30.72%, while its benchmark, the MSCI China Small Cap Index returned -24.77%. For the fourth quarter of the year, the Fund returned 11.31% versus 21.39% for the benchmark. 

Market Environment:

During the year, Chinese small caps lagged their large cap peers. Chinese equities were weak and choppy most of the year with continued worry of an economic growth slowdown in the country, weighed down by COVID-19 and enforced lockdowns, ADR delisting pricing pressures and investor worries that Russia-like sanctions could be implemented upon select Chinese companies. Additionally, geopolitical headwinds combined with disappointing announcements post the 20th Party Congress weighed on markets. China’s property market sentiment continued to be negative, and the real estate sector has been hit hard as potential buyers and local government casted doubts on whether some financially distressed developers can finish and deliver their pre-sold homes on time.

However, the last quarter of the year saw a reversal as Chinese equities posted some of the strongest results within global markets with a rebound in sentiment stemming from the government’s statements and actions which support the easing of COVID-related restrictions in favor of ‘living with Covid’ policies. The roll-back of Covid restrictions gained momentum during the quarter spurring speculation of a forthcoming increase in consumer discretionary activity and overall mobility.

Performance Contributors and Detractors:

The portfolio’s stock selection within the industrials and utilities sectors as well as its under allocation to the real estate sector contributed the most to the Fund’s relative performance for the full year. Among individual holdings, Yangzijiang Shipbuilding, one of the few private shipbuilders left in China and is a well-run and efficient operator, contributed the most to absolute and relative performance. The company outperformed on strong vessel orderbooks given by greater demand on higher freight rates as well as environmentally driven upgrades, which encourages an acceleration of scrapping of old vessels for the industry. China Overseas Property, a property management firm, whose sister company (China Overseas Land and Investment) is one of China’s largest state-owned property developers, was another top contributor to relative performance. In the current market consolidation phase of the real estate industry, state-owned enterprise (SOE) developers are favored as they have some of the strongest balance sheets in the market and have fewer liquidity concerns. China Overseas Property has an asset light business model and is less subject to liquidity concerns. Further, its association with a SOE developer will continue to enable it to grow steadily while at the same time potentially benefit from M&A opportunities.

On the other hand, holdings in the information technology were among the top detractors to performance for the year. Technology holdings, including ACM Research, detracted amid regulatory policies and harsher new technology export controls introduced by the U.S. ACM Research is a semiconductor equipment company which provides a variety of equipment used in China’s foundries. With the new technology export controls in place, which prohibit high end equipment to be exported to China, China’s foundries may slow their capex expansion and reduce semiconductor equipment expenditures as they will not as easily move up the technology curve into more advanced processes.

CIFI Ever Sunshine was another detractor to performance. The company is a property management company and shares a similar business model as China Overseas Property, but is associated with private developer, CIFI. Private developers saw a significant multiple de-rating over the quarter given markets concerns about solvency. We continue to hold CIFI Ever Sunshine as we believe private developers will continue to see their liquidity conditions improve as contracted sales pick up with COVID restrictions easing.

Notable Portfolio Changes:

During the quarter, we added AK Medical, one of China’s leading orthopedics joint manufacturers. We have observed throughout the year that the overall attitude towards drug and medical devices price cuts have moderated and become less severe. This improves the overall predictability of future pricing impact and strengthens earnings visibility for the sector. AK Medical has also demonstrated its competitiveness under harsh pricing environments and has continued to gain market share. We like the orthopedic industry given its large addressable market and continued trends of orthopedic needs increasing given the demographic shifts in China. We also exited China Yongda, a luxury and mass-market auto dealer in China. The company trades at very attractive valuations and we continued to hold onto the stock given potential customer traffic recovery post COVID. However, we eventually decided to sell out of the name due to limited portfolio exposure to the growing category of new energy vehicles (NEVs) and concerns that NEVs will require less service and maintenance and affect a sizable part of revenues and profits for the company.


Looking ahead, China’s reopening will unfortunately be messy and the road to recovery will not be a smooth one. However, the overall direction of recovery remains clear and Portfolio Managers expect much of the COVID-related disruptions endured in 2022 to be behind. Global economic outlook looks increasingly uncertain as the US. continues to slow, and Europe’s economic outlook continues to look fragile. In this environment, China will have to depend ever more on its internal growth engine for recovery, which could be a challenge pending more encouraging signs of recovery on the property, consumption and industrial output fronts, although we are cautiously optimistic that China is able to navigate through these challenges. Valuations wise, the Hong Kong market has rebounded, with positive stock performance in the fourth quarter of 2022, bolstered by end-of-COVID optimism. The A-share market however, has not quite reacted to much of the good news surrounding COVID relaxation. Coupled with valuations that are now more attractive, the A-share market stands to benefit from positive catalysts this year and in the portfolio managers’ views, is well positioned for an improvement in 2023.

Rolling 12 Month Returns For the period ended 31/12/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews China Small Companies Fund (USD)
-30.72% -2.88% 77.70% 31.36% -18.79% 29/02/2012
MSCI China Small Cap Index (USD)
-24.77% -6.26% 27.21% 6.63% -19.53%
Matthews China Small Companies Fund (GBP)
-22.34% -1.58% N.A. N.A. N.A. 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
-15.29% -5.39% 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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