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Asia Growth

Matthews Asia ESG Fund MASGX

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and eco­nomic impact in Asia ex Japan
  • Deep bottom-up fundamental approach with bias toward mid- and small-capitalization companies whose ESG qualities are less appreciated
  • Seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

04/30/2015

Inception Date

6.63%

YTD Return

(as of 03/04/2021)

$15.93

Price

(as of 03/04/2021)

$95.66 million

Fund Assets

(as of 01/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia ESG Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies of any market capitalization located in Asia that Matthews believes satisfy one or more of its environmental, social and governance (“ESG”) standards. The Fund seeks to invest in companies across the market capitalization spectrum that Matthews believes to be undervalued but of high quality and run by management teams with good operating and governance track records. In addition, the Fund seeks to invest in those Asian companies that have the potential to profit from the long-term opportunities presented by global environmental and social challenges as well as those Asian companies that proactively manage long-term risks presented by these challenges.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 04/30/2015
Fund Assets $95.66 million (01/31/2021)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 84.60%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.54%
Net Expense Ratio 1.38%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 01/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
6.96% 33.01% 6.96% 58.84% 14.07% 17.28% n.a. 11.78% 04/30/2015
MSCI All Country Asia ex Japan Index
4.11% 20.17% 4.11% 36.59% 7.29% 16.66% n.a. 8.70%
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
11.09% 25.34% 42.87% 42.87% 13.22% 13.87% n.a. 10.65% 04/30/2015
MSCI All Country Asia ex Japan Index
6.84% 18.66% 25.36% 25.36% 8.46% 13.90% n.a. 8.07%
For the years ended December 31st
Name 2020 2019 2018 2017 2016
Matthews Asia ESG Fund
MASGX
42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 12/31/2020)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Ratings

  • OVERALL
  • out of 58 funds
  • 3 YEAR
  • out of 58 funds
  • 5 YEAR
  • out of 55 funds
  • 1 YEAR
  • 1st
  • 4 out of 33 funds
  • 3 YEAR
  • 1st
  • 5 out of 32 funds
  • 5 YEAR
  • 2nd
  • 15 out of 29 funds
  • SINCE INCEPTION
  • 2nd
  • 10 out of 29 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

Portfolio Characteristics

(as of 12/31/2020)
55
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

25.3x
P/E using FY1 estimates
18.5x
P/E using FY2 estimates
$35.0 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 02/28/2021)
Name Sector Country % Net Assets
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 7.1
LG Chem, Ltd., Pfd. Materials South Korea 5.4
Shriram City Union Finance, Ltd. Financials India 5.2
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 4.4
IndusInd Bank, Ltd. Financials India 4.0
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.0
Bandhan Bank, Ltd. Financials India 2.9
Phoenix Mills, Ltd. Real Estate India 2.9
Mahindra & Mahindra, Ltd. Consumer Discretionary India 2.8
Andes Technology Corp. Information Technology Taiwan 2.6
TOTAL 41.3

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 12/31/2020)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 24.6 23.1 1.5
Financials 16.6 17.9 -1.3
Health Care 14.6 5.0 9.6
Industrials 12.9 5.3 7.6
Consumer Discretionary 11.2 19.1 -7.9
Materials 6.0 4.3 1.7
Real Estate 5.2 3.9 1.3
Communication Services 3.7 11.5 -7.8
Consumer Staples 3.5 5.0 -1.5
Energy 0.0 2.8 -2.8
Utilities 0.0 2.2 -2.2
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Country Fund Benchmark Difference
China/Hong Kong 37.4 51.6 -14.2
India 21.3 10.4 10.9
South Korea 12.2 15.2 -3.0
Taiwan 11.7 14.2 -2.5
Japan 5.7 0.0 5.7
Bangladesh 3.6 0.0 3.6
Singapore 2.6 2.4 0.2
United States 1.8 0.0 1.8
Thailand 1.3 2.1 -0.8
Vietnam 0.7 0.0 0.7
Indonesia 0.1 1.5 -1.4
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.8 -0.8
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 30.7 64.0 -33.3
Large Cap ($10B-$25B) 17.8 19.7 -1.9
Mid Cap ($3B-$10B) 21.7 14.9 6.8
Small Cap (under $3B) 28.2 1.5 26.7
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

Source: FactSet Research Systems.

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.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/15/2020 12/16/2020 $0.00950 $0.39961 $0.43641 $0.84552 6.0% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended December 31, 2020

For the year ending December 31, 2020, the Matthews Asia ESG Fund returned 42.87% (Investor Class) and 43.13% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 25.36%. For the fourth quarter, the Fund returned 25.34% (Investor Class) and 25.43% (Institutional Class) versus 18.66% for the Index.

Market Environment:

Equities across Asia were volatile in the year, but broad market indexes tracking the region ultimately generated attractive returns. Global markets fell in the first quarter, as worries surrounding the spread of COVID-19 moved from China throughout Europe to the U.S. and then back to South Asia, including India. Fears of a global growth slowdown turned into reality as governments worldwide began to implement different versions of “shelter in place” to contain the movement of the virus. But central banks globally, led by the U.S. Federal Reserve, unleashed powerful, and largely effective, monetary stimulus. Many governments also unveiled meaningful fiscal stimulus. Both those actions helped ease worries about a crippling and sustained global recession. They also provided cover for many emerging markets (EM) to undertake their own monetary and fiscal stimuli thereby supporting their economies.

In the third quarter, economic recovery and improved sentiment began to take hold as major economies continued to relax COVID-19 lockdown restrictions even further. China’s V-shaped recovery in manufacturing along with a steady recovery in domestic consumption brought some normalcy to daily life. EM currencies rallied slightly against the U.S. dollar in the third quarter, acting as a slight tailwind for EM equities. Growth stocks outpaced value and small caps outperformed large caps. The fourth quarter saw further economic strengthening. Cyclical stocks in beaten-up or export-driven markets such as Indonesia and South Korea rallied most in the fourth quarter, while markets that experienced early recovery like China, Japan and India lagged slightly. Market strength gained momentum following the U.S. Presidential elections in November as markets hoped for less confrontational U.S. – China relations, combined with an announcement of several approved COVID-19 vaccines that were due for distribution early in 2021.

Performance Contributors and Detractors:

From a regional perspective, stock selection in China and South Korea was a notable contributor for the full year. North Asia economies reopened more quickly following the early stages of the pandemic and investor sentiment turned to optimism toward Chinese and South Korean equities. From a sector perspective, stock selection in information technology was a notable contributor. Information technology companies rallied as the pandemic boosted demand for e-commerce and other stay-at-home solutions. Among individual securities, Samsung SDI was a contributor. The company is one of the world’s leading small, automotive and energy storage battery suppliers. It also has a minority equity stake in the world’s largest display company. In addition it also has an electronic materials division with exposure to memory and foundry customers. The company is one of the global leaders in the battery technology primarily used in electric vehicles (EVs) and utility-grade energy storage systems.

On the other hand, stock selection in India and an overweight to Bangladesh detracted from performance. Sentiment toward South and Southeast Asia was weaker in the early stages of the pandemic, though sentiment began to improve markedly in the second half of the year. Stock selection in financials was a detractor. Indian financials, including Induslnd Bank, struggled amid poor sentiment toward banks but we maintain a positive long-term view on the Indian financials in the portfolio. Going into 2020, the Indian banking system was already dealing with the after effects of several years of anemic growth and the resultant credit cycle was presented with a new challenge in the form of COVID19-related lockdown in India. However, India’s central government announced a slew of fiscal measures to support the economy. Our bank holdings recovered from their first quarter bottoms during the rest of the year as asset quality held up better than expected but share prices still remain below their pre-COVID19 levels.

Notable Portfolio Changes:

During the fourth quarter, the Fund initiated a position in Flat Glass, a leading Chinese PV (photo voltaic) glass manufacturer. This is our first initiation in a solar power-related name since the inception of the Fund. Historically, the broader sector was plagued by cyclicality of demand, regulatory and policy uncertainties, excess capacity, intense competition, inability to generate cash flows and excess leverage. With solar power reaching grid parity across much of the globe, the economics have improved meaningfully and no longer need government subsidies in the form of feed-in-tariffs and the policy uncertainty it brings.

During the quarter we also participated in select health care IPOs in China including in JD Health, a leader in the fast growing online pharmacy and consultation business in China. We also exited our positions in South Asian pharmaceutical names such as Lupin and Abbott Laboratories Pakistan to fund more attractive opportunities elsewhere.

Outlook:

Looking ahead, uncertainty remains in terms of the pace of Asia’s economic recovery. Given the uncertainty of how quickly vaccines can be distributed and return to normal daily patterns remain unknown, the strength of the economic recovery in different markets where we invest may not be immediately evident. Valuations for Asia ex-Japan equities are above their historic averages and in some areas of the market, we believe investors have already priced in a high level of anticipated future growth. All of these emphasize the importance of investing with a long-term view.

At the same time, we see many reasons for optimism. From a growth perspective, Asia is on a path to economic recovery and the sheer size of the consumer base in Asia works in its favor. Valuations for Asia ex-Japan equities rose in 2020, so there is less valuation support for the broader market, but we continue to see pockets of opportunity. Finally, turning to market liquidity, we see good liquidity across Asia. We believe the confluence of these drivers will support medium to long-term growth across many parts of Asia.

The pandemic accelerated many trends, including the importance of ESG criteria when investing with a long-term view. Through our bottom-up research process, we continue to follow themes that have the potential to improve the quality of life for millions, and even billions, of people in the developing world. These areas of interest include companies that are working to expand access to high-quality, affordable health care, provide more inclusive financing solutions to individuals and small businesses, build more affordable housing and generate sustainable transportation solutions.

 

As of 12/31/2020, the securities mentioned comprised the Matthews Asia ESG Fund in the following percentages: Samsung SDI Co., Ltd., Pfd., 5.0%; IndusInd Bank, Ltd., 3.0%; Flat Glass Group Co., Ltd. H Shares, 4.4%; JD Health International, Inc., 0.7%. The Fund held no positions in Lupin or Abbott Laboratories Pakistan. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MASGX as of 12/31/2020
1YR 3YR 5YR 10YR Since Inception Inception Date
42.87% 13.22% 13.87% N.A. 10.65% 04/30/2015

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.54%
Net Expense Ratio 1.38%

Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class (which is offered through a separate prospectus to eligible investors) to 1.20%, first by waiving class specific expenses (e.g., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving nonclass specific expenses (e.g., custody fees) of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 1.20% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 1.20%. If the operating expenses fall below the expense limitation in a year within three years after Matthews has made a waiver or reimbursement, the Fund may reimburse Matthews up to an amount that does not cause the expenses for that year to exceed the lesser of (i) the expense limitation applicable at the time of that fee waiver and/or expense reimbursement or (ii) the expense limitation in effect at the time of recoupment. This agreement will remain in place until April 30, 2021 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.

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Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

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. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect 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.