TOP

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 17/07/2024)

$11.74

NAV (USD)

(as of 17/07/2024)

-0.06

1 Day NAV Change

(as of 17/07/2024)

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 $2.32 million (30/06/2024)
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 30/06/2024
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 30/06/2024
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 30/06/2024)
Fund Benchmark
Number of Positions 56 673
Weighted Average Market Cap $145.2 billion $162.4 billion
Active Share 83.3 n.a.
P/E using FY1 estimates 14.8x 14.5x
P/E using FY2 estimates 12.3x 12.4x
Price/Cash Flow 10.0 9.5
Price/Book 2.6 2.1
Return On Equity 19.4 16.7
EPS Growth (3 Yr) 26.5% 22.1%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 30/06/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.5
MediaTek, Inc. Information Technology Taiwan 3.7
Samsung Electronics Co., Ltd. Information Technology South Korea 3.5
Samsung Electronics Co., Ltd., Pfd. Information Technology South Korea 2.8
BIM Birlesik Magazalar AS Consumer Staples Turkey 2.7
HDFC Bank, Ltd. Financials India 2.6
Despegar.com, Corp. Consumer Discretionary Argentina 2.4
Reliance Industries, Ltd. Energy India 2.3
Shriram Finance, Ltd. Financials India 2.3
UltraTech Cement, Ltd. Materials India 2.2
TOTAL 34.0

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 30/06/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 28.2 31.6 -3.4
Financials 20.2 23.4 -3.2
Consumer Discretionary 11.2 6.9 4.3
Materials 7.6 8.0 -0.4
Consumer Staples 7.4 5.5 1.9
Energy 5.3 5.6 -0.3
Industrials 4.4 7.5 -3.1
Real Estate 3.2 1.3 1.9
Communication Services 1.5 4.2 -2.7
Health Care 1.3 3.1 -1.8
Utilities 0.7 3.0 -2.3
Cash and Other Assets, Less Liabilities 9.1 0.0 9.1

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

Country Fund Benchmark Difference
India 20.0 25.6 -5.6
Taiwan 14.6 25.7 -11.1
South Korea 14.3 16.2 -1.9
Brazil 6.6 5.7 0.9
United Arab Emirates 4.6 1.5 3.1
United States 4.4 0.0 4.4
Mexico 4.1 2.8 1.3
Turkey 3.3 1.0 2.3
Vietnam 3.1 0.0 3.1
Poland 3.0 1.3 1.7
Argentina 2.4 0.0 2.4
Peru 1.8 0.4 1.4
Kazakhstan 1.6 0.0 1.6
Philippines 1.5 0.7 0.8
Indonesia 1.4 2.1 -0.7
Saudi Arabia 1.2 5.2 -4.0
Chile 0.9 0.6 0.3
Thailand 0.8 1.8 -1.0
United Kingdom 0.7 0.0 0.7
France 0.4 0.0 0.4
South Africa 0.0 3.9 -3.9
Malaysia 0.0 1.8 -1.8
Qatar 0.0 1.1 -1.1
Kuwait 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
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 9.1 0.0 9.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 52.8 53.6 -0.8
Large Cap ($10B-$25B) 19.2 24.6 -5.4
Mid Cap ($3B-$10B) 14.9 21.0 -6.1
Small Cap (under $3B) 4.0 0.8 3.2
Cash and Other Assets, Less Liabilities 9.1 0.0 9.1

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 30 June 2024

Market Environment

  • Emerging markets performed largely in line with our expectations in the second quarter, with Taiwan and India leading the way, while Mexico and Brazil underperformed. Inflation on the whole is not as high as in developed markets and in the absence of rate cuts from the U.S. Federal Reserve, a lot of positive performance was driven by fundamentals and earnings growth.
  • The expansion of the artificial intelligence (AI) supply chain, led by large U.S. tech firms, was another supportive theme, particularly for semiconductor hubs in emerging markets. We also saw volatility in India and Mexico following their elections, triggered by Prime Minister Modi’s failure to win a majority and Claudia Sheinbaum’s landslide victory—sparking worries among investors that the economic status quo in both countries could be challenged.
  • By region, Asia led performance in emerging markets. Taiwan was driven by demand for hardware from the U.S. while India’s markets recovered from their negative reaction to the election result when it became clear Modi would form a coalition with allies. Indian local bonds also had their inaugural inclusion in the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) index, which is expected to add significant foreign investor inflows in coming quarters.
  • In Latin America, higher-for-longer U.S. interest rates remained a headwind. In Mexico, though the long-term structural story remains intact, uncertainty over the potential reformist agenda of the new administration pulled markets down. High rates also hampered Brazil’s economy and market sentiment was negatively impacted by the corporate interventions of the government and concerns over its fiscal management.
     

Contributors and Detractors

  • For the quarter ended June 30, 2024, the Emerging Markets ex China Equity Fund returned 4.53%, (I Acc USD) while its benchmark, the MSCI Emerging Markets ex China Index, returned 4.37% over the same period.
  • On a country basis, the top three contributors to relative performance were Saudi Arabia due to an underweight allocation, Turkey due to stock selection and Vietnam due to an off-benchmark allocation. The top three detractors were Mexico due to stock selection, India due to an underweight allocation and South Africa due to zero allocation.
  • On a sector basis, the top three contributors to relative performance were consumer staples, materials and information technology (IT) due to stock selection. The top three detractors were financials, industrials and real estate due to stock selection.
  • The largest contributors to absolute performance included Taiwan Semiconductor Manufacturing Co. (TSMC), a Taiwanese chipmaker, BIM Birlesik Magazalar, a food and consumer goods store operator, and MediaTek, a Taiwanese semiconductor company. The top three detractors to performance included PT Bank Rakyat Indonesia (Persero), an Indonesian microfinance company, Grupo Financiero Banorte, a leading commercial bank in Mexico, and Banco BTG Pactual, a leading Brazilian financial services company.

Outlook

  • Post-COVID growth in emerging markets is starting to come through and broaden out and we think this will pave the way for consistent earnings growth over the next few years. We also see more upside to equity performance driven by North Asia and underpinned by earnings growth, a widening of AI-related adoption and improving value in certain markets.
  • Emerging markets, particularly those in Latin America, should also benefit from the onset of a monetary easing cycle in the U.S. and the decline in the value of the U.S. dollar that would likely bring, in our view.
  • In India, we think the market will continue to progress though it is still expensive. Under the new coalition government, we may see spending on growth spread out beyond infrastructure and capex which could yield more opportunities in consumption.

 

 

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