Matthews Asia ex Japan Dividend Fund

Period ended 31 March 2019

For the quarter ending 31 March 2019, the Matthews Asia ex Japan Dividend Fund returned 10.86%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned 11.45%.

Market Environment:  

Asia's equity markets rebounded strongly during the first quarter of 2019, recovering some of the double-digit losses seen in 2018. Despite the region's near-term economic slowdown and decelerating earnings growth among Asian companies, investor sentiment toward Asian equities started to recover. Fueling the recovery were improved macro conditions, including the pause of U.S. monetary tightening, progress in China—U.S. trade negotiations and China's policy support measures designed to address its slowing economy. Amid improving sentiment, Asian equities, led by China A-shares, delivered solid returns. 

Performance Contributors and Detractors: 

While stock selection in the consumer staples sector benefited the Fund's relative performance during the quarter, our stocks in the consumer discretionary sector failed to keep pace with those in the benchmark, and were the main factors to the underperformance. 

In terms of individual securities, China Resources Power Holdings, an independent power producer, was the largest detractor to performance as its management abruptly abandoned its dividend commitment to speed its push into renewable energies. We decided to sell the position. Saigon Beer Alcohol Beverage also posed a drag on performance as investors took profits, amid rich valuations, following last year's strong rally. 

Among the top contributors to Fund performance during the quarter was our position in WH Group, a leading pork meat producer in both the U.S. and China, as a trade truce between the U.S. and China appeared likely. Sentiment on its stock also recovered and pork prices rebounded in the United States, which bodes well for the company's U.S. earnings.
SUNeVision Holdings, Hong Kong's leading data center operator, also was among the top contributors to performance during the quarter. Although the company did not report strong earnings growth, the newly acquired site for a new data center fueled investor excitement for continued growth opportunities. 

Notable Portfolio Changes: 

During the quarter, we initiated a position in Chinese high-end liquor maker Wuliangye Yibin as its management team started to refocus its core “Wuliangye” brand and tried to narrow its product price gap with industry leader Kweichow Moutai. 

In the banking industry, we also initiated a position in China Merchants Bank as new clarity on China Merchants Bank's wealth management business should improve its earning quality profile. In addition, we initiated a position in Taiwan's logistics firm Kerry TJ Logistics as it has been regaining pricing power following its efforts in recent years to retool its business. 

We decided to sell our position in Vinh Hoan Corp., a seafood supplier in Vietnam. The company did well due to favorable demand drivers from both the U.S. and China, but this year the demand outlook is less certain. We fear the cyclicality of the business may lead to downside surprises for Vinh Hoan's corporate earnings.


An easing of macro uncertainties is helping to restore investor sentiment toward Asia. While the near-term macro data could continue to disappoint, the market is likely to be more focused on a potential recovery later in the year. From a bottom-up perspective, decelerating earnings growth among Asia's firms has been more or less captured by a muted consensus outlook. Asian equity valuations continue to trade below long-term averages, providing long-term investment opportunities.

Rolling 12 Month Returns for the period ended 31 December 2018
Matthews Asia ex Japan Dividend Fund 2018 2017 2016 2015 2014
I (Acc) (USD) -12.37% 47.29% 6.89% n.a. n.a.
MSCI All Country Asia ex Japan Index (USD) -14.12% 42.08% 5.76% n.a. n.a.
I (Acc) (GBP) -7.38% 34.23% 28.50% n.a. n.a.
MSCI All Country Asia ex Japan Index (GBP) -8.78% 29.78% 26.15% n.a. n.a.

Risk Considerations

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 and emerging market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. 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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends. These and other risks associated with investing in the Fund can be found in the Prospectus.

There is no guarantee that a company will pay or continue to increase dividends.

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 International Capital Management, LLC (“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.

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg