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Matthews Emerging Markets ex China Equity Fund

Snapshot
  • Seeks alpha in global emerging markets ex China—capitalizes on consumption and innovation trends
  • Quality growth portfolio—based on deep, holistic analysis
  • All-cap, company-first approach—emphasizes fundamental research over top-down country or sector allocation

15/09/2023

Inception Date

7.92%

YTD Return (USD)

(as of 02/12/2024)

$11.31

NAV (USD)

(as of 02/12/2024)

+0.03

1 Day NAV Change

(as of 02/12/2024)

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

Under normal market conditions, the Fund seeks to achieve its investment objective by investing, directly or indirectly, primarily (i.e., at least 65% of its total net assets) in equities of companies located in or with substantial ties to emerging market countries excluding China. Emerging Market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. In addition, the Fund may also invest in depositary receipts that are treated as emerging markets investments, including American, European and Global Depositary Receipts.

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.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 15/09/2023
Fund Assets $2.30 million (31/10/2024)
Base Currency USD
ISIN: LU2651608247 (USD) LU2651608320 (GBP)
Bloomberg Symbol EMMKCIA:LX (USD) EMMEXCI:LX (GBP)
Benchmark MSCI Emerging Markets ex China Index
Geographic Focus Emerging Markets excluding China- Countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe.
SFDR Classification Article 8
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio 0.90% ( USD ) 0.90% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Rolling 12 Month
    Returns
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As of 31/10/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
-2.56% 0.26% 8.97% 26.19% n.a. n.a. n.a. 12.52% 15/09/2023
MSCI Emerging Markets ex China Index (USD)
-3.71% -0.64% 8.93% 27.97% n.a. n.a. n.a. 16.46%
Matthews Emerging Markets ex China Equity Fund (GBP)
0.65% -0.82% 6.85% 18.18% n.a. n.a. n.a. 8.13% 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
0.46% -0.73% 8.01% 20.78% n.a. n.a. n.a. 12.74%
As of 30/09/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
0.86% 1.65% 11.83% 22.59% n.a. n.a. n.a. 16.47% 15/09/2023
MSCI Emerging Markets ex China Index (USD)
1.30% 4.11% 13.13% 27.97% n.a. n.a. n.a. 22.27%
Matthews Emerging Markets ex China Equity Fund (GBP)
-0.73% -4.15% 6.16% 12.09% n.a. n.a. n.a. 8.15% 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
-0.74% -1.88% 7.51% 16.44% n.a. n.a. n.a. 13.35%
For the period ended 30/09/2024
Name 2024 2023 2022 2021 2020 Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
22.59% n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (USD)
27.97% n.a. n.a. n.a. n.a.
Matthews Emerging Markets ex China Equity Fund (GBP)
12.09% n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
16.44% n.a. n.a. n.a. n.a.

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

All returns over 1 year are annualized

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 31/10/2024)
Fund Benchmark
Number of Positions 63 680
Weighted Average Market Cap $136.4 billion $167.1 billion
Active Share 82.4 n.a.
P/E using FY1 estimates 15.8x 14.3x
P/E using FY2 estimates 13.6x 12.6x
Price/Cash Flow 10.2 9.5
Price/Book 2.6 2.1
Return On Equity 16.7 17.1
EPS Growth (3 Yr) 27.1% 21.5%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/10/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.5
MediaTek, Inc. Information Technology Taiwan 3.4
ICICI Bank, Ltd. Financials India 3.2
Samsung Electronics Co., Ltd. Information Technology South Korea 2.7
HDFC Bank, Ltd. Financials India 2.6
Hon Hai Precision Industry Co., Ltd. Information Technology Taiwan 2.6
Credicorp, Ltd. Financials Peru 2.1
SK Hynix, Inc. Information Technology South Korea 2.0
Reliance Industries, Ltd. Energy India 2.0
Emaar Properties PJSC Real Estate United Arab Emirates (U.A.E.) 1.9
TOTAL 32.0

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 31/10/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 28.0 30.2 -2.2
Financials 23.3 25.2 -1.9
Consumer Staples 9.0 5.3 3.7
Consumer Discretionary 8.9 6.6 2.3
Energy 4.6 5.1 -0.5
Industrials 3.9 7.3 -3.4
Health Care 3.8 3.5 0.3
Communication Services 3.6 4.6 -1.0
Real Estate 2.4 1.4 1.0
Utilities 2.0 3.0 -1.0
Materials 1.1 7.7 -6.6
Cash and Other Assets, Less Liabilities 9.3 0.0 9.3

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

Country Fund Benchmark Difference
India 22.6 25.9 -3.3
Taiwan 16.6 26.1 -9.5
South Korea 11.3 13.9 -2.6
Brazil 6.4 6.6 -0.2
United States 4.1 0.0 4.1
United Arab Emirates 4.0 1.6 2.4
Vietnam 4.0 0.0 4.0
Indonesia 3.3 2.3 1.0
Malaysia 3.1 2.0 1.1
Philippines 2.6 0.8 1.8
Peru 2.1 0.4 1.7
Thailand 1.9 2.1 -0.2
Mexico 1.5 2.6 -1.1
South Africa 1.3 4.4 -3.1
China/Hong Kong 1.3 0.2 1.1
Singapore 1.2 0.0 1.2
Saudi Arabia 1.0 5.4 -4.4
Poland 1.0 1.1 -0.1
Chile 0.9 0.6 0.3
Turkey 0.7 0.8 -0.1
Qatar 0.0 1.1 -1.1
Kuwait 0.0 1.0 -1.0
Greece 0.0 0.6 -0.6
Hungary 0.0 0.3 -0.3
Czech Republic 0.0 0.2 -0.2
Colombia 0.0 0.1 -0.1
Egypt 0.0 0.1 -0.1
Cash and Other Assets, Less Liabilities 9.3 0.0 9.3

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 47.7 53.7 -6.0
Large Cap ($10B-$25B) 27.1 25.0 2.1
Mid Cap ($3B-$10B) 12.9 20.4 -7.5
Small Cap (under $3B) 3.0 0.9 2.1
Cash and Other Assets, Less Liabilities 9.3 0.0 9.3

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 30/09/2024)
  • Business Involvement
  • Sustainability Attributes
Name Fund Benchmark Difference
Controversial Weapons
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 0.6 -0.6
Tobacco
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 0.5 -0.5
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 1.7 -1.7
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 99%
20.7 19.5 1.2

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.

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.

Portfolio Managers

Alex  Zarechnak photo
Alex Zarechnak

Lead Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Lead Manager

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Co-Manager

Sean  Taylor photo
Sean Taylor

Co-Manager

Sojung  Park photo
Sojung Park

Co-Manager

Commentary

Period ended 30 September 2024

Market Environment

  • Emerging markets performed well overall despite experiencing volatility related to concerns over a U.S. slowdown, China’s economic headwinds and sustainability of the artificial intelligence (AI) boom. Toward the end of the quarter, the Federal Reserve’s 50 basis point (O.50%) interest rate cut—and expectations of further cuts—helped to support market gains.
  • India’s equity market delivered a robust performance. Economic growth rates remain high and following the formation of a coalition government after the general election, there are signs that growth is becoming more balanced to include services and consumption as well as infrastructure and industry.
  • In North Asia, Taiwan’s technology-heavy market was challenged despite the potential growth opportunities that AI-linked segments offer, in part as prior performance had been strong and as questions arose over valuations. South Korea’s market underperformed against the benchmark with semiconductor stocks particularly soft.
  • Latin America’s major markets faced their own domestic headwinds. In Mexico, uncertainty over potential policies by the new president and their impact for the private sector weighed on market performance and sentiment. Meanwhile Brazil’s equity markets posted resilient performance. However, inflation remained high and the central bank is currently in a rate-increasing cycle.

Contributors and Detractors

  • For the quarter ended September 30, 2024, the Emerging Markets ex China Equity Fund returned 1.65% (I Acc USD), while its benchmark, the MSCI Emerging Markets ex China Index, returned 4.11% over the same period.
  • On a country basis, the top three contributors to relative performance were Brazil and India due to stock selection and the U.S. due to an off-benchmark allocation. The top three detractors were South Korea, Poland and Saudi Arabia due to stock selection.
  • On a sector basis, the top three contributors to relative performance were industrials, energy and health care due to stock selection. The top three detractors were consumer staples, consumer discretionary and materials due to stock selection.
  • The largest contributors to absolute performance included Weg, a Brazilian industrial machinery manufacturer, Shriram Finance, an Indian financial services provider, and CP ALL, a Chinese convenience store operator. The top three detractors to performance included Samsung Electronics, a South Korean semiconductor and consumer electronics maker, Mediatek, a Taiwanese semiconductor company, and SK Hynix, a Korean semiconductor company.

Outlook

  • The Fed’s rate cut will, we think, provide an impetus for a number of central banks in emerging markets to cut their own rates which should be favorable for businesses and economies. This is a significant turning point particularly for economies in Asia in our view. Fed rate cuts typically also bring downward pressure on the U.S. dollar which is often a tailwind for emerging economies.
  • For some markets, U.S. rates cuts will have less of an impact, in our view. Taiwanese equities have already benefitted from the AI boom and valuations are now a little stretched while in Brazil we expect rates to rise in the short term before taking a downward path.
  • In India, earnings growth is feeding through to equity returns but valuations remain expensive. Thus, finding businesses where rates of growth support valuation multiples is critical. Across emerging markets, we expect volatility to continue, particularly as we approach and pass through the U.S. election. Further out, we think  market performance will start to center around domestic economic expansion and less on specific drivers like U.S. technology-related growth.

 

Rolling 12 Month Returns For the period ended 30/09/2024 - I (Acc)
Name 2024 2023 2022 2021 2020 Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
22.59% N.A. N.A. N.A. N.A. 15/09/2023
MSCI Emerging Markets ex China Index (USD)
27.97% N.A. N.A. N.A. N.A.
Matthews Emerging Markets ex China Equity Fund (GBP)
12.09% N.A. N.A. N.A. N.A. 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
16.44% N.A. 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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