TOP

Matthews China Small Companies Fund

Snapshot
  • 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

29/02/2012

Inception Date

5.84%

YTD Return (USD)

(as of 21/05/2024)

$22.29

NAV (USD)

(as of 21/05/2024)

-0.19

1 Day NAV Change

(as of 21/05/2024)

Objective

Seeks to achieve long term capital appreciation.

Sustainability

The Fund promotes environmental and social characteristics according to Article 8 of SFDR. Furthermore, the Fund uses both activity- and norm-based exclusions. Information relating to the environmental and social characteristics of this Fund is available in the prospectus.

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 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.

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. 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 $205.61 million (30/04/2024)
Base Currency USD
ISIN: LU0721876877 (USD) LU2075925870 (GBP)
Bloomberg Symbol MACSMCI:LX (USD) MACSCIG: LX (GBP)
Benchmark MSCI China Small Cap Index
Geographic Focus China and Taiwan: China includes its administrative and other districts, such as Hong Kong.
SFDR Classification Article 8
Fees & Expenses
Management Fee 1.00%
Total Expense Ratio 1.25% ( USD ) 1.25% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 30/04/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Small Companies Fund (USD)
3.99% 15.26% 1.47% -9.49% -18.61% 2.69% 5.82% 6.44% 29/02/2012
MSCI China Small Cap Index (USD)
4.36% 13.79% -3.56% -22.92% -23.89% -9.63% -3.46% -1.65%
Matthews China Small Companies Fund (GBP)
4.89% 16.65% 3.00% -9.97% -15.74% n.a. n.a. 0.70% 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
5.28% 15.73% -1.81% -22.63% -21.30% n.a. n.a. -7.61%
As of 31/03/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Small Companies Fund (USD)
-2.47% -2.42% -2.42% -17.80% -18.10% 2.32% 4.96% 6.14% 29/02/2012
MSCI China Small Cap Index (USD)
0.27% -7.59% -7.59% -27.55% -24.16% -10.39% -4.25% -2.01%
Matthews China Small Companies Fund (GBP)
-2.48% -1.80% -1.80% -19.57% -15.75% n.a. n.a. -0.43% 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
0.41% -6.74% -6.74% -29.09% -21.90% n.a. n.a. -8.89%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews China Small Companies Fund (USD)
-15.73% -30.72% -2.88% 77.70% 31.36% -18.79% 56.47% -1.96% 2.98% -3.20%
MSCI China Small Cap Index (USD)
-24.82% -24.77% -6.26% 27.21% 6.63% -19.53% 24.62% -5.95% 3.48% -0.34%
Matthews China Small Companies Fund (GBP)
-20.32% -22.34% -1.58% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
MSCI China Small Cap Index - GBP (GBP)
-29.06% -15.29% -5.39% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
For the period ended 31/03/2024
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China Small Companies Fund (USD)
-17.80% -14.50% -21.84% 62.23% 25.87% 29/02/2012
MSCI China Small Cap Index (USD)
-27.55% -13.78% -30.18% 64.63% -19.51%
Matthews China Small Companies Fund (GBP)
-19.57% -9.29% -18.03% 45.57% n.a. 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
-29.09% -8.19% -26.84% 47.95% n.a.

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

All returns over 1 year are annualized

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 30/04/2024)
Fund Benchmark
Number of Positions 48 241
Weighted Average Market Cap $5.4 billion $1.5 billion
Active Share 94.6 n.a.
P/E using FY1 estimates 13.9x 7.9x
P/E using FY2 estimates 11.8x 6.6x
Price/Cash Flow 10.8 4.5
Price/Book 2.5 0.7
Return On Equity 17.0 5.2
EPS Growth (3 Yr) 27.6% 6.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 31/03/2024)
3.40%
Alpha
0.85
Beta
98.10%
Upside Capture
89.43%
Downside Capture
-0.77
Sharpe Ratio
0.47
Information Ratio
12.80%
Tracking Error
79.84

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 30/04/2024)
Name Sector % Net Assets
KE Holdings, Inc. Real Estate 4.5
Yangzijiang Shipbuilding Holdings, Ltd. Industrials 4.4
Kanzhun, Ltd. Communication Services 4.2
Anhui Yingjia Distillery Co., Ltd. Consumer Staples 4.2
Samsonite International SA Consumer Discretionary 4.1
Hisense Home Appliances Group Co., Ltd. Consumer Discretionary 3.8
Tongcheng Travel Holdings, Ltd. Consumer Discretionary 3.5
Giant Biogene Holding Co., Ltd. Consumer Staples 3.5
China Overseas Property Holdings, Ltd. Real Estate 3.3
ENN Natural Gas Co., Ltd. Utilities 3.2
TOTAL 38.7

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 30/04/2024)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 21.4 11.8 9.6
Industrials 19.2 12.9 6.3
Information Technology 12.3 9.3 3.0
Consumer Staples 10.4 6.5 3.9
Communication Services 8.6 8.4 0.2
Health Care 8.5 22.4 -13.9
Real Estate 7.8 8.2 -0.4
Materials 3.6 10.6 -7.0
Utilities 3.2 3.7 -0.5
Energy 2.6 1.7 0.9
Financials 2.3 4.4 -2.1
Liabilities in Excess of Cash and Other Assets -0.1 0.0 -0.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 4.5 0.0 4.5
Mid Cap ($3B-$10B) 64.5 5.1 59.4
Small Cap (under $3B) 31.0 94.9 -63.9
Liabilities in Excess of Cash and Other Assets -0.1 0.0 -0.1

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
Hong Kong Listed Companies 43.9
Mainland China Listed Companies 25.8
Other 20.1
ADR/GDR 10.4
Liabilities in Excess of Cash and Other Assets -0.1

Mainland China listed companies includes A Share and B Shares. 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. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

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.

ESG Characteristics

(as of 31/03/2024)
  • Business Involvement
  • Sustainability Attributes
Name Fund Benchmark Difference
Controversial Weapons
Fund Coverage: 99% Benchmark Coverage: 97%
0.0 0.0 0.0
Tobacco
Fund Coverage: 99% Benchmark Coverage: 97%
0.0 0.3 -0.3
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 95%
0.0 0.0 0.0
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 99%
21.5 16.5 5.0

Board Diversity: Represents the weighted average ratio of female board members in investee companies.
Tobacco: Represents companies that generate more than 5% of revenue from tobacco manufacturing exposure to or production or that generate more than 50% of revenue from tobacco retail. 
UN Global Compact Violators: Represents companies that have been assessed as failing to comply with the 10 United Nations Global Compact Principles by ISS-ESG Norms-Based Research. Different ESG research providers may come to different conclusions on the severity of the violation.
Controversial weapons include companies with involvement in the following: anti-personnel mines; biological and chemical weapons; cluster weapons; depleted uranium; nuclear weapons and white phosphorus. A company is excluded if it is directly involved in the production, selling and/or distribution of (parts of) controversial weapons and this involvement concerns the core weapon system, or components/services of the core weapon system that are tailor-made and essential for the lethal use of the weapon.

Source: Sustainalytics, Factset, MSCI, Matthews Asia.

GHG Intensity

(as of 31/03/2024)

Fund Coverage: 99%; Benchmark Coverage: 88% as of 31/03/2024

GHG Intensity: Represents the normalized portfolio’s total weighted average (scope 1 + scope 2) carbon emissions intensity, using the most recently available data (emissions data from 2020, 2021). Carbon intensity represents the issuer’s total carbon emissions per EUR million of revenue (tCO2e divided by EUR million in revenue).

Source: Sourced from ISS ESG. Where not covered by external data providers, we have tried to source these data points.

Sustainability-related Disclosures

This Fund Yes No
Complies with Article 8 of SFDR  
Investment process integrates ESG factors and sustainability risks based on proprietary and third-party research  
Applies norms- and activity-based exclusions  
Promotes environmental and social characteristics  
Has a sustainable investment objective  
Conducts engagement  
Exercises Voting Rights  

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 Fund’s investment objective and risk factors.

For more information, please refer to our Responsible Investment and Stewardship Policy and our ESG-Related Investment Policy of Matthews Asia Funds.

Ratings

  • OVERALL
  • 3 YEAR
  • 5 YEAR
  • 10 YEAR

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

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Co-Manager

Hardy  Zhu photo
Hardy Zhu

Co-Manager

Commentary

Period ended 31 March 2024

Market Environment

  • Chinese stocks were volatile in the first quarter, and we saw steep falls particularly in some of the smaller indexes. Chinese equities continued to face pressure because of lingering, broad-based concerns including the implications surrounding the late year U.S. elections, deflationary pressures driven by excess capacity, the lack of large-scale policy support for the property sector and the sluggishness in the recovery in consumer demand.
  • Economic recovery has been much weaker than the market expected and there are only incremental signs that China’s property market is beginning to turn a corner.   
  • Some of the government’s efforts, however, have started to gain traction, such as initiatives to support the stock market by buying equities and restricting certain stock sales and short selling. These efforts helped stabilize the market in February and supported a short-lived rally.

Contributors and Detractors 

  • For the quarter ended March 31, 2024, the China Small Companies Fund returned -2.42%, (I Acc USD) while its benchmark, the MSCI China Small Cap Index, returned -7.59% over the same period.
  • The top three contributors to relative performance, on a sector basis, were consumer discretionary, information technology (IT) and industrials due to stock selection. The top three detractors to relative performance were materials due to an underweight allocation, real estate and financials due to stock selection.
  • The three largest contributors to absolute performance during the quarter included ACM Research, a semiconductor equipment company which provides a variety of equipment used in China’s foundries, Yangzijiang Shipbuilding, China’s largest private-owned shipyard or ship building company, and Tongcheng Travel Holdings, an online travel agency. The top three detractors to performance included China Overseas Property Holdings, a property management firm, KE Holdings, a real estate digital platform provider that offers listing information as well as a suite of realty services, and Peijia Medical, a medical devices manufacturing company.

Outlook

  • Looking ahead, the question remains as to whether China’s equity markets are charting a sustainable path of recovery. Notwithstanding the well-known concerns, investor sentiment is improving toward China based upon perceived risk/reward.
  • Marginal year-over-year improvement in earnings expectations combined with stock multiples trading at roughly a 50% discount to February 2021 highs is giving investors confidence that current valuations provide an adequate cushion for unforeseen risks.
  • The calculus suggests that even with little to no improvement in sentiment or stock multiples, consensus estimates in year-over-year earnings growth could lead to attractive equity returns.
  • Thus, we are still in a cautious frame of mind, tinged with some optimism. While last year we think Chinese government policy over promised and under achieved, this year we think the government is seeking to under promise and overachieve. One potentially destabilizing variable on our radar is geopolitics, particularly with the U.S. election approaching. 

 

Rolling 12 Month Returns For the period ended 31/03/2024 - I (Acc)
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China Small Companies Fund (USD)
-17.80% -14.50% -21.84% 62.23% 25.87% 29/02/2012
MSCI China Small Cap Index (USD)
-27.55% -13.78% -30.18% 64.63% -19.51%
Matthews China Small Companies Fund (GBP)
-19.57% -9.29% -18.03% 45.57% N.A. 30/01/2020
MSCI China Small Cap Index - GBP (GBP)
-29.09% -8.19% -26.84% 47.95% 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