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Matthews China Total Return Equity Fund

Snapshot

Effective 30 August 2024, the Fund was renamed from the China Dividend Fund to the China Total Return Equity Fund.

  • 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

31/01/2013

Inception Date

13.21%

YTD Return (USD)

(as of 02/12/2024)

$16.71

NAV (USD)

(as of 02/12/2024)

+0.03

1 Day NAV Change

(as of 02/12/2024)

Objective

Seeks total return through capital appreciation and current income.

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 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.

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

Fund Facts
Inception Date 31/01/2013
Fund Assets $4.66 million (31/10/2024)
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
SFDR Classification Article 8
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio 1.00% ( USD )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • 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 China Total Return Equity Fund (USD)
-5.59% 14.94% 16.73% 11.81% -8.65% 0.06% 4.50% 4.74% 31/01/2013
MSCI China Index (USD)
-5.91% 17.78% 21.94% 22.01% -8.24% -1.01% 2.52% 2.58%
As of 30/09/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Total Return Equity Fund (USD)
20.22% 18.28% 23.64% 12.79% -7.03% 1.66% 5.15% 5.29% 31/01/2013
MSCI China Index (USD)
23.93% 23.65% 29.60% 24.14% -5.38% 1.00% 3.58% 3.14%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews China Total Return Equity Fund (USD)
-20.65% -16.29% 0.32% 24.30% 14.82% -10.44% 38.09% 6.09% 7.94% 0.92%
MSCI China Index (USD)
-11.04% -21.80% -21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26%
For the period ended 30/09/2024
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China Total Return Equity Fund (USD)
12.79% 1.06% -29.50% 14.99% 17.49% 31/01/2013
MSCI China Index (USD)
24.14% 5.44% -35.29% -7.24% 33.76%

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.

Yield

(as of 31/10/2024)
3.49% Dividend Yield

Source: FactSet Research Systems, Bloomberg, Matthews Asia

Portfolio Characteristics

(as of 31/10/2024)
Fund Benchmark
Number of Positions 42 598
Weighted Average Market Cap $112.2 billion $155.8 billion
Active Share 64.4 n.a.
P/E using FY1 estimates 10.4x 10.4x
P/E using FY2 estimates 9.4x 9.7x
Price/Cash Flow 6.6 6.6
Price/Book 1.4 1.4
Return On Equity 13.4 13.0
EPS Growth (3 Yr) 12.5% 6.3%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 30/09/2024)
-3.90%
Alpha
0.82
Beta
67.00%
Upside Capture
87.66%
Downside Capture
-0.39
Sharpe Ratio
-0.19
Information Ratio
8.67%
Tracking Error
94.77

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/10/2024)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 9.3
Alibaba Group Holding, Ltd. Consumer Discretionary 8.2
Meituan Class B Consumer Discretionary 4.3
Ping An Insurance Group Co. of China, Ltd. Financials 4.0
China Construction Bank Corp. Financials 3.3
Postal Savings Bank of China Co., Ltd. Financials 3.0
Fuyao Glass Industry Group Co., Ltd. Consumer Discretionary 2.9
AIA Group, Ltd. Financials 2.9
China Everbright Environment Group, Ltd. Industrials 2.7
China Suntien Green Energy Corp., Ltd. Energy 2.6
TOTAL 43.2

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
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 32.1 31.8 0.3
Financials 14.4 17.8 -3.4
Industrials 11.3 4.9 6.4
Communication Services 10.3 20.7 -10.4
Consumer Staples 9.5 4.0 5.5
Energy 5.1 3.1 2.0
Health Care 3.8 3.6 0.2
Information Technology 3.3 6.6 -3.3
Materials 2.1 3.1 -1.0
Real Estate 2.0 2.1 -0.1
Utilities 0.0 2.3 -2.3
Cash and Other Assets, Less Liabilities 6.2 0.0 6.2

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

Asset Type Fund
Common Equities and ADRs 93.9
Cash and Other Assets, Less Liabilities 6.2
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 51.2 72.2 -21.0
Large Cap ($10B-$25B) 11.1 14.1 -3.0
Mid Cap ($3B-$10B) 21.0 13.5 7.5
Small Cap (under $3B) 10.5 0.2 10.3
Cash and Other Assets, Less Liabilities 6.2 0.0 6.2
China Exposure Portfolio Weight
Hong Kong Listed Companies 73.6
Mainland China Listed Companies 9.9
Other 7.8
ADR/GDR 2.6
Cash and Other Assets, Less Liabilities 6.2

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 30/09/2024)
  • Business Involvement
  • Sustainability Attributes
Name Fund Benchmark Difference
Controversial Weapons
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 0.0 0.0
Tobacco
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 0.1 -0.1
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 99%
0.0 0.0 0.0
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 99%
22.2 20.3 1.9

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.

GHG Intensity

(as of 30/09/2024)

Fund Coverage: 99%; Benchmark Coverage: 98% as of 30/09/2024

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

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Lead Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Co-Manager

Elli  Lee photo
Elli Lee

Co-Manager

Hardy  Zhu photo
Hardy Zhu

Co-Manager

Commentary

Period ended 30 September 2024

Market Environment

  • China's difficulties are well documented. Since the second quarter, consumer sentiment continued to deteriorate and month-on-month property prices continued to decline. There is de-premiumization occurring as consumers are spending but they're much more selective in what they are spending on.
  • Despite this, many Chinese companies showed resilience. While earnings have disappointed in many areas, there were notable exceptions, particularly in e-commerce, where there has been a focus on the bottom line and improvements in profitability, rather than purely on sales growth. Companies more directly tied to China’s domestic economy faced greater challenges. Among retailers, we are seeing margins coming down as companies try to maintain volumes.
  • While we believe valuations are generally compelling, earnings projections are changeable and some stocks can remain attractive while others can become expensive. Toward the end of the quarter the markets rallied after the central bank launched a broad and significant stimulus package.

Contributors and Detractors

  • For the quarter ended September 30, 2024, the China Total Return Equity Fund returned 18.28% (I Acc USD), while its benchmark, the MSCI China Index, returned 23.65% over the same period.
  • On a sector basis, the top three contributors to relative performance were utilities due to zero allocation, financials due to stock selection and communication services due to an underweight allocation. The top three detractors were industrials, consumer discretionary and real estate due to stock selection.
  • The largest contributors to absolute performance included Alibaba Group, an e-commerce platform company, Meituan, China’s largest food delivery service and internet platform company, and Tencent Holdings, an online gaming and social media conglomerate. The top three detractors included Miniso Group Holding, a wholesaler and retailer of lifestyle goods, PetroChina, one of China’s largest state-owned oil and gas companies, and SITC International Holdings, a marine shipping services provider.

Outlook

  • The stimulus moves announced by China’s central bank included measures to boost the stock market, support the real estate sector and add liquidity in the economy. We view them as the broadest and most aggressive set of proposals since China’s economy started to face challenges more than three years ago. However, it will take time to see if the measures provide a sustainable catalyst for economic recovery or whether further stimulus is warranted.
  • We believe that Chinese equities have been priced too cheaply amid all the macro negativities. We have seen earnings growth this year but it has not been fully reflected in stock market pricing. As such, while improvements in the economy are anticipated, we believe the markets are attractively valued and could do well based on multiple re-rating.
  • Meanwhile, we expect volatility to remain in China’s markets, particularly as we approach and pass through the U.S. election.

 

Rolling 12 Month Returns For the period ended 30/09/2024 - I (Acc)
Name 2024 2023 2022 2021 2020 Inception Date
Matthews China Total Return Equity Fund (USD)
12.79% 1.06% -29.50% 14.99% 17.49% 31/01/2013
MSCI China Index (USD)
24.14% 5.44% -35.29% -7.24% 33.76%

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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