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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

n.a.

YTD Return (USD)

(as of 24/06/2024)

$11.42

NAV (USD)

(as of 24/06/2024)

+0.03

1 Day NAV Change

(as of 24/06/2024)

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 $2.21 million (31/05/2024)
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
  • data_graph_selected Created with Sketch.
As of 31/05/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Matthews Emerging Markets ex China Equity Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
As of 31/03/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets ex China Equity Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Matthews Emerging Markets ex China Equity Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 15/09/2023
MSCI Emerging Markets ex China Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

The Fund has commenced operations from 15 September 2023 and performance will not be shown until the fund has reached one year since inception.

Portfolio Characteristics

(as of 31/05/2024)
Fund Benchmark
Number of Positions 55 671
Weighted Average Market Cap $129.2 billion $134.0 billion
Active Share 85.8 n.a.
P/E using FY1 estimates 14.0x 13.4x
P/E using FY2 estimates 11.9x 11.6x
Price/Cash Flow 9.2 8.8
Price/Book 2.6 2.0
Return On Equity 20.5 16.7
EPS Growth (3 Yr) 28.3% 22.6%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/05/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.6
MediaTek, Inc. Information Technology Taiwan 3.5
Samsung Electronics Co., Ltd. Information Technology South Korea 3.3
FPT Corp. Information Technology Vietnam 2.9
Despegar.com, Corp. Consumer Discretionary Argentina 2.9
Samsung Electronics Co., Ltd., Pfd. Information Technology South Korea 2.7
BIM Birlesik Magazalar AS Consumer Staples Turkey 2.5
HDFC Bank, Ltd. Financials India 2.4
Dino Polska SA Consumer Staples Poland 2.2
ICICI Bank, Ltd. Financials India 2.1
TOTAL 34.1

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 31/05/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 28.3 29.7 -1.4
Financials 19.6 24.0 -4.4
Consumer Discretionary 10.2 6.9 3.3
Materials 8.0 8.5 -0.5
Consumer Staples 7.5 5.7 1.8
Energy 5.8 5.8 0.0
Industrials 4.7 7.8 -3.1
Real Estate 3.1 1.2 1.9
Communication Services 1.5 4.4 -2.9
Health Care 1.3 2.9 -1.6
Utilities 0.0 3.0 -3.0
Cash and Other Assets, Less Liabilities 10.1 0.0 10.1

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

Country Fund Benchmark Difference
India 17.0 24.9 -7.9
Taiwan 13.1 24.6 -11.5
South Korea 13.1 15.9 -2.8
Brazil 6.8 6.4 0.4
Mexico 6.0 3.4 2.6
United States 5.6 0.0 5.6
Vietnam 4.6 0.0 4.6
United Arab Emirates 4.4 1.5 2.9
Turkey 3.3 1.1 2.2
Argentina 2.9 0.0 2.9
Poland 2.7 1.4 1.3
Peru 1.9 0.5 1.4
Philippines 1.6 0.8 0.8
Kazakhstan 1.6 0.0 1.6
Saudi Arabia 1.2 5.2 -4.0
Chile 1.0 0.7 0.3
France 1.0 0.0 1.0
Spain 1.0 0.0 1.0
United Kingdom 0.7 0.0 0.7
Indonesia 0.4 2.1 -1.7
South Africa 0.0 3.9 -3.9
Thailand 0.0 2.0 -2.0
Malaysia 0.0 1.9 -1.9
Kuwait 0.0 1.0 -1.0
Qatar 0.0 1.0 -1.0
Greece 0.0 0.7 -0.7
Hungary 0.0 0.3 -0.3
China/Hong Kong 0.0 0.2 -0.2
Colombia 0.0 0.2 -0.2
Czech Republic 0.0 0.2 -0.2
Egypt 0.0 0.1 -0.1
Cash and Other Assets, Less Liabilities 10.1 0.0 10.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 48.9 52.5 -3.6
Large Cap ($10B-$25B) 13.8 24.4 -10.6
Mid Cap ($3B-$10B) 23.3 22.1 1.2
Small Cap (under $3B) 3.9 0.9 3.0
Cash and Other Assets, Less Liabilities 10.1 0.0 10.1

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: 91% Benchmark Coverage: 99%
0.0 0.6 -0.6
Tobacco
Fund Coverage: 91% Benchmark Coverage: 99%
0.0 0.4 -0.4
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 1.8 -1.8
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 99%
19.8 16.9 2.9

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 31 March 2024

Market Environment

  • The first quarter of the year was a period of contrast across emerging markets. In particular, markets linked to technology, communication services and the global supply chains of semiconductors and artificial intelligence (AI) benefited while other interest-rate sensitive areas were held back by a reset in expectations as to the trajectory of U.S. Federal Reserve cuts.
  • In terms of currencies, they were moderately weaker against a backdrop of “higher-for-longer” U.S. interest rates, but commodities were broadly higher which tends to be supportive of many cyclical exporters in emerging markets.
  • By region, India outperformed the broad emerging markets, though there was some consolidation over concerns regarding elevated valuations. South Korea was aided by its exposure to global trade while Taiwan gained amid demand for AI-related hardware.
  • Key markets of Latin America were challenged as it became clear that global interest rates would stay higher for longer. While Brazil and Mexico were ahead of the curve in raising interest rates to combat inflation, their economies are now contending with prolonged and elevated interest rates which will likely be cut in lockstep with the measured strategy of the U.S. Fed. In Brazil, markets reacted to signals that President Lula could curb the independence of Petrobras and Vale, two of the largest stocks in the index.  

Contributors and Detractors

  • For the quarter ended March 31, the Emerging Markets ex China Equity Fund returned 5.25%, (I Acc USD) while its benchmark, the MSCI Emerging Markets ex China Index, returned 4.1% over the same period.
  • The top three contributors to relative performance, on a country basis, were Vietnam due to an off-benchmark allocation, Taiwan due to stock selection and Kazakhstan due to off-benchmark position. The top three detractors to relative performance were India, Poland and the Philippines due to stock selection.
  • The top three contributors to relative performance, on a sector basis, were information technology (IT), financials and materials due to stock selection. The top three detractors to relative performance were industrials, real estate and health care due to stock selection.
  • The largest contributors to absolute performance during the quarter included Taiwan Semiconductor Manufacturing Company, a Taiwanese chip maker, FPT, a Vietnamese IT services company, and Applied Materials, a U.S. semiconductor equipment manufacturer. The top three detractors to performance included HDFC Bank, a leading Indian bank and financial services provider, Armac Locacao Logistica, a Brazilian consumer goods and rental services provider, and Globant, an Argentinian IT and software development company.

Outlook

  • Greater clarity in the global macro environment may cause market volatility to dampen in the coming months. As we look out to the rest of the year, we see reasons to be positive on emerging markets. The first is the natural recovery that is taking hold after COVID. Economic growth is picking up across emerging markets and is being driven by domestic consumption. Secondly, when interest rates are cut in the U.S., many emerging markets will in turn be able to cut and so we should get a cyclical pickup.
  • Looking across regions, countries and sectors, valuations are elevated in many areas warranting an active approach to seek out relative value in an effort to minimize risk wherever possible in our view.

 

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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