Snapshot
- Total return strategy seeks to access the growth of China with lower volatility
- Unconstrained all-cap portfolio with a quality bias
- Flexible approach offers participation in both growth and value markets
A focus on Asia—and providing compelling investment solutions for our clients—is what we believe distinguishes us among investment managers. Our insights into investment opportunities and risks are backed by proprietary research, a collaborative culture and 30 years of experience.
31/01/2013
Inception Date
-0.27%
YTD Return (USD)
(as of 27/03/2023)
$18.55
NAV (USD)
(as of 27/03/2023)
-0.07
1 Day NAV Change
(as of 27/03/2023)
Seeks total return with an emphasis on providing current income.
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total assets, in income-paying publicly traded common stocks, preferred stocks, convertible preferred stocks, and other equity-related instruments of companies located in China. For 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 may also invest in convertible fixed-income securities.
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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends. 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.
These and other risks associated with investing in the Fund can be found in the prospectus.
Inception Date | 31/01/2013 | |
Fund Assets | $11.71 million (28/02/2023) | |
Base Currency | USD | |
ISIN: | LU0871673488 (USD) | |
Bloomberg Symbol | MATACDI:LX (USD) | |
Benchmark | MSCI China Index | |
Geographic Focus | China and Taiwan: China includes its administrative and other districts, such as Hong Kong |
Management Fee | 0.75% | |
Total Expense Ratio As of 31/03/2022 | 1.00% ( USD ) |
Objective | Seeks total return with an emphasis on providing current income. |
Strategy | The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total assets, in income-paying publicly traded common stocks, preferred stocks, convertible preferred stocks, and other equity-related instruments of companies located in China. For 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 may also invest in convertible fixed-income securities. |
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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends. 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 risks associated with investing in the Fund can be found in the prospectus |
Source: Brown Brothers Harriman (Luxembourg) S.C.A.
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.
Dividend Yield | 2.81% |
Source: FactSet Research Systems, Bloomberg, Matthews Asia
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Class I USD ACC shares.
Sources: Zephyr StyleADVISOR
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
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
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.
Lead Manager
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews Asia and manages the firm’s China Dividend and China A-Shares Strategies and co-manages the China and Asia ex Japan Total Return Equity Strategies. Prior to joining Matthews Asia in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Lead Manager
Portfolio Manager
Winnie Chwang is a Portfolio Manager at Matthews Asia and manages the firm’s China Small Companies and China Dividend Strategies and co-manages the China, Pacific Tiger and Asia Dividend Strategies. She joined the firm in 2004 and has built her investment career at the firm. Winnie earned an MBA from the Haas School of Business and received her B.A. in Economics with a minor in Business Administration from the University of California, Berkeley. She is fluent in Mandarin and conversational in Cantonese.
Co-Manager
Portfolio Manager
Andrew Mattock is a Portfolio Manager at Matthews Asia and manages the firm’s China and China Small Companies Strategies and co-manages the firm’s Pacific Tiger and China Dividend Strategies. Prior to joining the firm in 2015, he was a Fund Manager at Henderson Global Investors for 15 years, first in London and then in Singapore, managing Asia Pacific equities. Andrew holds a Bachelor of Business majoring in Accounting from ACU. He began his career at PricewaterhouseCoopers and qualified as a Chartered Accountant.
Co-Manager
Portfolio Manager
Elli Lee is a Portfolio Manager at Matthews Asia and manages the firm’s Korea Strategy and co-manages the Asia Dividend and China Dividend Strategies. Prior to joining the firm as a Research Analyst in 2016, Elli worked at Bank of America Merrill Lynch for 10 years, most recently in Korean Equity Sales and previously as an Equity Research Analyst covering South Korea’s engineering, construction, steel and education sectors. From 2003 to 2005, Elli was an Investor Relations Specialist at Hana Financial Group in Seoul. She earned a Master of Science in Global Finance from the Hong Kong University of Science and Technology Business School and New York University Stern School of Business, and received a B.A. in Economics from Bates College. Elli is fluent in Korean.
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.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI China A Onshore Index captures large and mid cap representation across China securities listed on the Shanghai and Shenzhen exchanges. Index is for comparative purposes only and it is not possible to invest directly in an index.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
Commentary
Period ended 31 December 2022
For the year ending 31 December 2022, the Matthews China Dividend Fund returned -16.29%, while its benchmark, the MSCI China Index returned -21.80%. For the fourth quarter of the year, the Fund returned 16.18% versus 13.53% for the benchmark.
Market Environment:
2022 will certainly be remembered as a year of volatility. Global equity markets reacted negatively to a series of events, including the Russian invasion of Ukraine, the spike in energy costs, aggressive rate rises by the U.S. Federal Reserve and other central banks, the lockdown in Shanghai, tensions over Taiwan, and the Chinese Communist Party’s selection of a new leadership team for the next five years.
In November, Chinese equities markets hit their lowest point of the year. However, in that same month, China relaxed many of its COVID quarantine policies, signaling a change in policy direction in managing the virus and Chinese equities reacted favorably. Then, in early December, the government announced the scrapping of its zero-COVID policy and the removal of quarantine requirements for international visitors. Meanwhile, the U.S. Public Company Accounting Oversight Board (PCAOB) announced that it was able to fully inspect and investigate the audit workbooks of PCAOB-registered accounting firms working for Chinese companies listed on U.S. securities exchanges. This greatly reduced the risk of Chinese companies being forced to delist in the U.S. On the back of these positive developments, Chinese equities, especially those listed in the offshore market, began a strong rebound.
Performance Contributors and Detractors:
During 2022, at the sector level, stock selection in industrials, consumer discretionary and information technology were the biggest contributors to performance. On the other hand, stock selection in the energy sector was the biggest detractor. In terms of market capitalization, small-cap holdings continued to outperform their large-cap peers.
Among individual holdings, Yangzijiang Shipbuilding was the top contributor. Having spun off its financial and investment business to focus on its core shipbuilding business, the company has grown its order book and last year secured the first contract for its LNG (Liquified Natural Gas) ship. It also benefited from a weakening Chinese currency and declining steel price. China Tourism Group Duty Free was the second-largest contributor as its business in Hainan Island and international airports in China may benefit significantly when Chinese tourism returns to normal. Pinduoduo, an online shopping platform, was also a top contributor as COVID-related lockdowns forced many consumers to shop online and its discount pricing also attracted more spending. However, we are very mindful that its recent push into the U.S. market might significantly reduce its short-term earnings and we will adjust our position accordingly.
Conversely, consumer internet giant Tencent was the largest detractor to performance. Given a challenging operating environment, management has been doing a good job increasing long-term investor returns by distributing its investments in companies in specie to shareholders. China Suntien Green Energy was the second-largest detractor as its gas pipeline suffered from lower utilization due to reduced industrial activity. Pharmaron Beijing, a leading Contract Research Organization (CRO), was also a large detractor. The company and the clinical trial services industry is increasingly facing risks tied to U.S.-China tensions and it may be pressed to build facilities outside China which we believe would be a drag on profitability.
Notable Portfolio Changes:
During the year we added Ping An Insurance Group. While Ping An has been hampered by its exposure to the real estate sector and China’s zero-COVID policy, we believe its competitive advantage over state-owned insurance companies still exists. In addition, we added Wharf Real Estate Investment which owns some of the largest prime shopping centers in Hong Kong. We expect that the return of mainland Chinese consumers will increase retail sales of Wharf’s tenants and thus create drivers of higher rents down the road. We also added delivery company ZTO Express as we expect that a rebound of Chinese consumption growth in 2023 will create volume growth for the industry.
We exited BOC Hong Kong as we see limited credit-demand pickup while competition for deposits is driving up funding costs. We also exited Chongqing Changan Automobile as passenger car purchase-tax benefits are starting to be reduced and competitors will cut prices, in our view. We also exited battery-component maker Zhejiang Hangke Technology as changes to electric vehicles (EV) tax credits under the Inflation Reduction Act in the U.S. and slowing sales of EVs in China have created uncertainty for some of its key customers.
Outlook:
We are glad to see the Chinese government finally change course on its zero-COVID policy. The uncertain regulation of internet platforms, draconian cooling measures for the property market and zero-COVID have been the three main drags on the economy. But while policies are turning on all these areas there is still work to do. Many private entrepreneurs need to be incentivized to take risk and make investments and start hiring again while Chinese consumers who have stacked additional savings during the pandemic could also be helped with spending subsidies.
After the recent strong rally in Chinese equities we believe the next phase of the rebound will be driven by strong fundamentals. During this phase, high-quality companies with strong earnings and cash flow and healthy balance sheets could start to outperform. These companies have always been our focus. With their low valuations and strong growth potential we believe our portfolio could deliver an attractive total risk-adjusted return for shareholders.
Rolling 12 Month Returns For the period ended 31/12/2022 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg