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Asia Growth

Matthews Asia Growth Fund MPACX

Snapshot
  • Unconstrained growth strategy investing across Asia Pacific’s developed, emerging and frontier markets
  • Focus on the most profitable and attractive growth opportunities in Asia
  • Highly-differentiated portfolio offers exposure to names often under-represented in broader global equity strategies

10/31/2003

Inception Date

-3.91%

YTD Return

(as of 09/28/2021)

$37.90

Price

(as of 09/28/2021)

$2.15 billion

Fund Assets

(as of 08/31/2021)

Objective

Long-term capital appreciation.

Strategy

Under normal circumstances, the Matthews Asia Growth 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 located in Asia. The Fund may also invest in the convertible securities, of any duration or quality, of Asian companies. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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.

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

Fund Facts
Inception Date 10/31/2003
Fund Assets $2.15 billion (08/31/2021)
Currency USD
Ticker MPACX
Cusip 577-130-867
Portfolio Turnover 42.8%
Benchmark MSCI All Country Asia Pacific 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 1.08%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund
MPACX
0.45% -3.93% -3.88% 21.23% 13.90% 14.48% 10.43% 10.46% 10/31/2003
MSCI All Country Asia Pacific Index
2.49% -2.82% 2.45% 19.41% 9.61% 10.75% 7.77% 7.76%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund
MPACX
5.80% 7.91% 5.86% 43.27% 16.82% 17.37% 11.02% 11.17% 10/31/2003
MSCI All Country Asia Pacific Index
-0.27% 2.66% 5.14% 34.71% 10.66% 12.94% 7.28% 8.00%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Asia Growth Fund
MPACX
46.76% 26.18% -16.25% 39.39% 0.92% -0.05% 1.49% 19.35% 17.47% -12.70%
MSCI All Country Asia Pacific Index
20.07% 19.74% -13.25% 32.04% 5.21% -1.68% 0.29% 12.19% 17.05% -14.92%

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 06/30/2021)

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 11 funds
  • 3 YEAR
  • out of 11 funds
  • 5 YEAR
  • out of 11 funds
  • 1 YEAR
  • 1st
  • 5 out of 28 funds
  • 3 YEAR
  • 1st
  • 4 out of 28 funds
  • 5 YEAR
  • 1st
  • 3 out of 26 funds
  • 10 YEAR
  • 1st
  • 4 out of 16 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 10 funds

Ratings agency calculation methodology

Portfolio Managers

Taizo  Ishida photo
Taizo Ishida

Lead Manager

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Co-Manager

Portfolio Characteristics

(as of 06/30/2021)
Fund Benchmark
Number of Positions 66 1,547
Weighted Average Market Cap $66.0 billion $130.6 billion
Active Share 88.5 n.a.
P/E using FY1 estimates 33.1x 15.5x
P/E using FY2 estimates 30.0x 14.4x
Price/Cash Flow 32.2 10.6
Price/Book 6.4 1.9
Return On Equity -0.9 12.2
EPS Growth (3 Yr) 27.1% 8.0%

Sources: BNY Mellon Investment Servicing (US) Inc., Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 08/31/2021)
Name Sector Country % Net Assets
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 6.1
Sony Group Corp. Consumer Discretionary Japan 3.7
Bilibili, Inc. Communication Services China/Hong Kong 3.4
BeiGene, Ltd. Health Care China/Hong Kong 3.2
Bajaj Finance, Ltd. Financials India 3.1
CSL, Ltd. Health Care Australia 3.0
XPeng, Inc. Consumer Discretionary China/Hong Kong 2.9
HDFC Bank, Ltd. Financials India 2.9
Sea, Ltd. Communication Services Singapore 2.7
Innovent Biologics, Inc. Health Care China/Hong Kong 2.6
TOTAL 33.6

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 06/30/2021)
  • 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 $0.15061 $0.16831 $1.39495 $1.71387 4.6% 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 June 30, 2021

For the first half of 2021, the Matthews Asia Growth Fund returned 5.86% (Investor Class) and 5.90% (Institutional Class), while its benchmark, the MSCI All Country Asia Pacific Index, returned 5.14% over the same period. For the quarter ending June 30, the Fund returned 7.91% (Investor Class) and 7.93% (Institutional Class), while the benchmark returned 2.66%.

Market Environment:

Asian equity markets were broadly positive during the first half of the year, with growth stocks regaining momentum after the first quarter’s sharp pivot to value equities. In our view, growth stocks showed strength in the second quarter due to three factors: the trajectory of U.S. interest rate which peaked on May 12—which also proved to be the trough of the global equity market; COVID data trends such as vaccination penetration rates, number of new cases, hospitalizations and deaths; and the global Purchasing Managers’ Index (PMI)—an indicator of economic trends in the manufacturing and services sectors—peaked in May, suggesting either a pause or the end of the current cycle. Japan was hampered by the second factor, suffering from slow vaccination rollout, with partial national lockdowns, while China struggled with the third factor, as global economic momentum slowed.

During the period, Taiwan and India were the best performing Asia Pacific equities markets, followed by strong returns in Australia and Singapore, while Indonesia and Malaysia were relative laggards. Sector wise, “value” sectors such as energy, materials and financials outperformed at the expense of “growth” sectors such as consumer staples, health care and consumer discretionary.

Performance Contributors and Detractors:

Bilibili, Inc., a Chinese online entertainment company focusing on offering content that includes videos, live broadcasting and mobile games, was the top contributor to absolute performance year to date. Bilibili was the largest holding in the portfolio at the end of the second quarter, and our conviction level in the company remains high. Wuxi Biologics, the largest Chinese research and development outsourcing company for biologic drug development, was the next largest contributor to absolute performance. Wuxi’s stock price rallied strongly from a sluggish performance in the first quarter. Stock selection within the health care sector was a significant contributor to relative performance, as five out of the top 10 contributors to the portfolio’s absolute performance were health care companies, despite the relative weakness of the sector during the period.

On the other hand, Cloopen Group Holding Ltd., a China-based provider of cloud-based computing services offering communication solutions and networking services to clients worldwide, was the largest detractor to absolute performance. We participated in the company’s IPO in February with a positive view of the high-growing CPaaS (Communications Platform as a Service) space in China. Subsequently we have seen a slower cloud-based communications market growth rate in China than anticipated. While the jury is still out with respect to CPaaS, our position in Cloopen was less than 0.5% of the portfolio, and we chose to exit this position in the second quarter. AI Inside, a Japanese artificial intelligence--based software as a service OCR (optical character recognition) provider, was another large detractor. Since our initial purchase in June 2020, AI Inside performed well on the back of very strong topline growth until the third quarter earnings report in Feb 2021, which told a different story as new accounts were not opening up as fast as expected. In addition, the company indicated a new strategy focusing on existing its core OCR software business, and we exited our position.

Notable Portfolio Changes:

In the second quarter, some notable portfolio additions include two large-cap Chinese companies, Meituan, a web-based shopping platform provider and Wuxi AppTec, a contract research organization; a large‑cap Indian automaker Maruti Suzuki India Ltd.; and a large-cap Japanese industrial company FANUC Corp. The investment thesis is to strengthen the portfolio’s exposure to the cyclicals recovery with multiple angles. We believe Meituan is poised to benefit from the broader consumer spending recovery in China, while Maruti Suzuki should be a beneficiary of post-COVID consumption demand uptick in India. Wuxi AppTec is, in our estimation, one of the best clinical research organizations in the world, and on-going industry consolidation should further enhance its growth opportunities. FANUC is a well-known Japanese factory automation company which has seen an increase in orders recently due to higher capital expenditure expectations in automotive and semiconductor industries. Another notable change year to date has been an increased exposure to India.

In the second quarter, we exited from several smaller-sized holdings from the health care sector including Alphamab Oncology and ADC Therapeutics, and from the financials sector including BRAC Bank Ltd. and Sampath Bank PLC. We also exited from recent Chinese IPO names due to their smaller position sizes, including KE Holdings and Yatsen Holdings Ltd. Another notable exit is Oil Search Ltd., an oil and gas exploration and development company, which we had owned since 2009 with the anticipation of increasing demand for “cleaner” natural gas from ex-Japan Asian countries. While the increase in demand for natural gas materialized since we initiated the position, we now believe natural gas is no longer the “future” of cleaner energy sources going forward.

Outlook:

Looking ahead, we will continue to closely monitor the three important factors currently at play: the trajectory of U.S. interest rates, the rate of progress of COVID pandemic recovery, and global PMI outlook. At the same time, we are keeping a close watch on the tighter regulatory environment facing the information technology sector in China, as well as the U.S. to some extent. While the current geopolitical tensions between the U.S. and China is a major source of negative market sentiment, we remain focused on finding secular opportunities in China with strong long-term fundamentals. The recent indication of interest rate cuts in China via the Reserve Requirement Ratio (RRR) is encouraging to boost the declining demand.

We are also carefully monitoring vaccine rollout data in Japan, which has been discouragingly slow despite the obvious incentive for the Japanese government to act swiftly, given the upcoming Olympics start date of July 23. While we are currently hesitant to play into a “reopening” theme in the domestic Japanese market, this may change quickly once we see significant improvement in vaccination rates. One of the less reported and quite encouraging data points is the low number of hospitalizations and deaths from COVID despite the much discussed “case” numbers.

Over the long-term, we continue to see attractive opportunities in the health care sector across Asia, including India. We are optimistic about the continued growth prospects of the global health care sector. The recent regulatory changes to the drug approval process in China provide support to our investment approach, as more innovative biopharmaceutical companies may have greater opportunities for success compared to low R&D spending generic pharmaceutical companies. The core of our process remains in identifying opportunities on a company-by-company basis with strong top-line growth, strong management teams and an ability to grow its market share.

As of June 30, 2021, the securities mentioned comprised the Matthews Asia Growth Fund in the following percentages: Bilibili, Inc. ADR, 5.9%; Wuxi Biologics Cayman, Inc., 6.2%; Meituan B Shares, 1.3%; WuXi AppTec Co., Ltd. A Shares, 1.2%; Maruti Suzuki India, Ltd., 1.0%; and FANUC Corp., 0.9%… The Fund held no positions in: Cloopen Group Holding, Ltd. ADR, AI Inside Inc., Alphamab Oncology, ADC Therapeutics SA, BRAC Bank Ltd., Sampath Bank PLC, KE Holdings, Inc. ADR, Yatsen Holding, Ltd. ADR, and Oil Search, Ltd.

Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MPACX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
43.27% 16.82% 17.37% 11.02% 11.17% 10/31/2003

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 1.08%

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.

 

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.