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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

13.79%

YTD Return

(as of 12/03/2021)

$17.00

Price

(as of 12/03/2021)

$142.04 million

Fund Assets

(as of 10/31/2021)

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 $142.04 million (10/31/2021)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 84.6%
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 1.42%
Net Expense Ratio 1.38%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 11/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
-1.93% 1.71% 15.60% 28.42% 21.70% 17.30% n.a. 11.53% 04/30/2015
MSCI All Country Asia ex Japan Index
-3.86% -6.60% -5.79% 0.66% 10.86% 10.85% n.a. 5.94%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
0.77% 0.06% 14.52% 43.54% 19.82% 16.18% n.a. 11.68% 04/30/2015
MSCI All Country Asia ex Japan Index
-4.15% -9.23% -3.32% 14.73% 9.50% 10.44% n.a. 6.53%
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 09/30/2021)

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 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 46 funds
  • 1 YEAR
  • 1st
  • 2 out of 27 funds
  • 3 YEAR
  • 1st
  • 2 out of 27 funds
  • 5 YEAR
  • 1st
  • 2 out of 25 funds
  • SINCE INCEPTION
  • 1st
  • 2 out of 25 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Portfolio Characteristics

(as of 09/30/2021)
Fund Benchmark
Number of Positions 53 1,210
Weighted Average Market Cap $26.4 billion $146.4 billion
Active Share 96.1 n.a.
P/E using FY1 estimates 20.7x 13.7x
P/E using FY2 estimates 16.5x 12.8x
Price/Cash Flow 20.0 9.6
Price/Book 3.2 1.9
Return On Equity 8.9 13.2
EPS Growth (3 Yr) 4.7% -2.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2021)
10.06%
Alpha
1.01
Beta
109.86%
Upside Capture
75.89%
Downside Capture
0.85
Sharpe Ratio
0.96
Information Ratio
10.76%
Tracking Error
75.80

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 10/31/2021)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 6.5
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 6.3
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 5.6
Bandhan Bank, Ltd. Financials India 4.8
IndusInd Bank, Ltd. Financials India 4.2
JD Health International, Inc. Consumer Discretionary China/Hong Kong 4.1
Legend Biotech Corp. Health Care United States 3.4
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.3
Phoenix Mills, Ltd. Real Estate India 3.1
Meituan Consumer Discretionary China/Hong Kong 2.8
TOTAL 44.1

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 09/30/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

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

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

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 September 30, 2021

For the quarter ending September 30, 2021, the Matthews Asia ESG Fund returned 0.06% (Investor Class) and 0.12% (Institutional Class), while its benchmark, the MSCI Asia ex Japan Index, returned -9.23% over the same period.

Market Environment:

The Asia ex Japan equity markets saw a sharp correction during the third quarter of 2021 after steadily rising through the first half of the year. The perception of rising regulatory risks, especially in China, the specter of inflation driven by supply shortages (especially in semiconductors), shipping bottlenecks, higher energy prices, and a resurgent COVID-19 in parts of South East Asia led to a correction during the quarter. We also saw the first interest rate hike in the region (South Korea) since the pandemic, as the very accommodative post-COVID-19 monetary policy environments begin to normalize.

India and Indonesia were the best performing markets during the quarter on normalizing COVID-19 case rates, improving vaccination rates and normalizing economic activity. On the other hand, China and South Korea were the worst performing markets in the region weighed down by a rise in perceived political and regulatory risks in China and concerns of the memory semiconductor cycle rolling over in South Korea. China was particularly weak on the back of Chinese government’s targeted regulatory action in sectors such as education, internet gaming, social media platforms, and ride hailing services. The Indonesian rupiah and the Indian rupee were among the best performing Asiancurrencies during the quarter, while Thai baht and Philippine peso were among the worst performers.

From a sector perspective, energy and utilities were among the best performers, while the consumer discretionary and communication services were the worst performers.

Performance Contributors and Detractors:

On a country basis, China and India were the biggest contributors to the Fund’s relative performance during the third quarter, while Taiwan was the biggest detractor. Our overweight in India and underweight in China also contributed positively. Stock selection in China and South Korea contributed positively to relative performance, while our stock selection in Taiwan detracted from performance during the quarter.

From a sector standpoint, stock selection in industrials, consumer discretionary, health care and real estate were the biggest positive contributors, while our underweight in the energy and materials sectors somewhat detracted from relative performance.

Looking at individual portfolio holdings, South Korea’s Ecopro BM Co., developer and manufacturer of advanced battery materials such as high-nickel cathodes used in elective vehicles, was among the positive contributors to performance during the quarter. The market was enthused about the progress the company has made in growing its order book for high-nickel cathodes on the back of their key customers expanding their footprint to new geographies in a fairly significant way.

On the other hand, our underweight to world-leading semiconductor foundry company Taiwan Semiconductor Manufacturing Company (TSMC)—the benchmark’s largest constituent—contributed negatively to relative performance, as TSMC’s stock price held up relatively well during the large-cap technology stock sell-down during the quarter.

Notable Portfolio Changes:

It was a relatively quiet quarter in terms of portfolio trading activity. Early in the quarter we initiated a position in Ecopro BM, which became a positive contributor to performance, as described above.

With respect to positions closed during the quarter, we exited LG Chem, a leading South Korean battery maker and chemical company, after a series of quality and safety incidents involving LG Chem’s products and facilities. We have engaged the company in the past about these incidents and continue to monitor the name for any progress on these issues.

Outlook:

Looking ahead, earnings growth buoyed by strong cyclical recovery and valuations all appear supportive of Asia ex Japan stocks. We expect strong corporate earnings in 2021 as the global recovery continues to expand but we remain watchful about the impact of inflation on corporate earnings going into 2022. Across the region we see sufficient liquidity, and while we have not seen as much uptake in credit, any pick up in credit issuance should further support economic growth. In many parts of Asia COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters.

For investors interested in sustainability themes such as reducing carbon emissions, alleviating poverty and creating greater financial inclusion in the developing world, Asia remains an important investment destination, in our view. To tackle these themes globally, we believe we need to include the world’s most populous economies, many of which lie in Asia. As the global economy returns to strength, we also find attractive opportunities for alpha generation throughout our large, diverse investment universe.

 

As of September 30, 2021, the securities mentioned comprised the Matthews Asia ESG Fund in the following percentages: Ecopro BM Co., 2.9%; and Taiwan Semiconductor Manufacturing Company, 0.3%. The Fund held no positions in LG Chem.

Current and future portfolio holdings are subject to change and risk. The Fund’s ESG strategy may select or exclude securities of certain issuers for reasons other than potential performance.

Earnings growth is not representative of the fund’s future performance.

Average Annual Total Returns - MASGX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
43.54% 19.82% 16.18% N.A. 11.68% 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 1.42%
Net Expense Ratio 1.38%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2022. Please see the Fund’s prospectus for additional details.

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.

 

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.