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Asia Growth

Matthews Asia Innovators Fund MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

11.57%

YTD Return

(as of 01/19/2021)

$29.79

Price

(as of 01/19/2021)

$1.73 billion

Fund Assets

(as of 12/31/2020)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators 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 that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. 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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

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

Fund Facts
Inception Date 12/27/1999
Fund Assets $1.73 billion (12/31/2020)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 80.10%
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 1.19%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
12.08% 29.06% 86.72% 86.72% 25.35% 22.31% 14.87% 7.05% 12/27/1999
MSCI All Country Asia ex Japan Index
6.84% 18.66% 25.36% 25.36% 8.46% 13.90% 6.80% 7.27%
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
12.08% 29.06% 86.72% 86.72% 25.35% 22.31% 14.87% 7.05% 12/27/1999
MSCI All Country Asia ex Japan Index
6.84% 18.66% 25.36% 25.36% 8.46% 13.90% 6.80% 7.27%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Asia Innovators Fund
MATFX
86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11% -17.26%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70% -17.07%

MSCI AC Asia Ex Japan Index since inception value calculated from 12/31/99.

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
  • 10 YEAR
  • out of 31 funds
  • 1 YEAR
  • 1st
  • 2 out of 46 funds
  • 3 YEAR
  • 1st
  • 2 out of 43 funds
  • 5 YEAR
  • 1st
  • 6 out of 39 funds
  • 10 YEAR
  • 1st
  • 1 out of 26 funds
  • SINCE INCEPTION
  • 2nd
  • 7 out of 14 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Raymond Z. Deng photo
Raymond Z. Deng

Co-Manager

Portfolio Characteristics

(as of 12/31/2020)
38
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

42.5x
P/E using FY1 estimates
32.0x
P/E using FY2 estimates
$173.3 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 12/31/2020)
Name Sector Country % Net Assets
Bilibili, Inc. Communication Services China/Hong Kong 7.0
Sea, Ltd. Communication Services Singapore 5.1
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 5.0
Samsung Electronics Co., Ltd. Information Technology South Korea 4.8
TAL Education Group Consumer Discretionary China/Hong Kong 4.4
HDFC Bank, Ltd. Financials India 4.4
Meituan Consumer Discretionary China/Hong Kong 4.2
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 4.1
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.0
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 3.8
TOTAL 46.8

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
Consumer Discretionary 27.7 19.1 8.6
Communication Services 17.1 11.5 5.6
Information Technology 15.2 23.1 -7.9
Financials 12.9 17.9 -5.0
Health Care 9.5 5.0 4.5
Consumer Staples 6.5 5.0 1.5
Real Estate 2.9 3.9 -1.0
Industrials 1.8 5.3 -3.5
Energy 1.6 2.8 -1.2
Materials 1.1 4.3 -3.2
Utilities 0.0 2.2 -2.2
Cash and Other Assets, Less Liabilities 3.7 0.0 3.7

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 62.1 51.6 10.5
India 8.7 10.4 -1.7
South Korea 7.9 15.2 -7.3
Singapore 5.1 2.4 2.7
Taiwan 5.0 14.2 -9.2
France 3.5 0.0 3.5
Indonesia 1.9 1.5 0.4
United States 1.9 0.0 1.9
Vietnam 0.3 0.0 0.3
Thailand 0.0 2.1 -2.1
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.8 -0.8
Cash and Other Assets, Less Liabilities 3.7 0.0 3.7

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 78.2 64.0 14.2
Large Cap ($10B-$25B) 13.4 19.7 -6.3
Mid Cap ($3B-$10B) 2.6 14.9 -12.3
Small Cap (under $3B) 2.1 1.5 0.6
Cash and Other Assets, Less Liabilities 3.7 0.0 3.7

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 $0.00000 $0.13545 $0.31069 $0.44614 1.8% N.A.
12/16/2019 12/17/2019 $0.00000 $0.00000 $0.04272 $0.04272 0.3% 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.

For the quarter ending September 30, 2020, the Matthews Asia Innovators Fund returned 13.91% (Investor Class) and 13.97% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index returned 10.79%.

Market Environment:

Across most Asian markets, equities continued to climb in the third quarter as major economies further relaxed COVID-19 pandemic lockdown restrictions. Although COVID-19 cases continued to rise significantly, especially in India and parts of ASEAN, the gradual reopening of businesses —particularly those focused on services and consumption in north Asia—helped bolster sentiment and bring a floor to stock prices globally.

China’s V-shaped recovery in manufacturing along with a now steady recovery in domestic consumption has brought some normalcy to daily life. South Korea and Taiwan have also experienced a similar though not quite as robust a recovery as China. Continued market recovery in the third quarter was a function of easing of lockdowns combined with significant fiscal support and monetary easing from major developed and emerging governments and central banks. The dispersion of regional and country returns was significant for the quarter. India was Asia’s best performer followed by the north Asian countries of Taiwan, South Korea and China. Many Asian currencies appreciated against the U.S. dollar, providing an additional tailwind for equities. Growth stocks outpaced value and small caps outperformed large caps.

Although headline returns for broader markets were strong in the quarter, momentum started to slow in September as investors began to question the continued deceleration of COVID cases in major economies outside north Asia, as well as doubts as to whether governments would continue to provide fiscal support in the face of higher deficits. In addition, monetary easing limitations have investors wondering whether governments have the willingness or ability to provide additional stimulus.

Performance Contributors and Detractors:

During the third quarter, gaming and e-commerce company Sea Ltd. contributed to Fund performance. Based in Singapore, it’s one of the few Internet companies focused on serving customers in South and Southeast Asia with significant businesses in Singapore, Indonesia and Thailand that has achieved significant scale and market share. Sea Ltd., was among the first movers in e-commerce and gaming—attractive secular growth areas in Asia—and one of the first companies to build a regional platform, providing an edge over smaller competitors that may only operate within a single country. As a result the company enjoys significant market share and brand recognition.

A detractor to performance was computer-chip maker Silergy Corp., headquartered in Hangzhou, China. The company’s stock price has appreciated considerably over the past couple of years, benefiting from increased demand for local technology solutions in China. U.S. – China trade tensions have accelerated the development of technology supply chains within China. The stock price corrected in the quarter, which we view as a healthy correction. We continue to like the company’s long-term prospects and expect that local supply chains for computer chip technology in China may continue to expand for the next five to 10 years and beyond. The majority of semiconductors used by Chinese companies are still imported, so we believe the company has a long growth trajectory serving China’s domestic market.

From a country perspective, stock selection in China contributed to relative performance, while an underweight in Taiwan detracted. Many of our Chinese holdings, concentrated in innovative sectors, such as communication services and health care, performed well in the quarter. While we added to our exposure in Taiwan in the quarter, we remain significantly underweight relative to the benchmark. Taiwanese stocks performed well on Taiwan’s highly effective response to COVID-19, as well as lingering U.S. – China trade tensions. From a sector perspective, communication services, financials and consumer discretionary contributed to relative performance. On the other hand, information technology, health care and industrials detracted.

Notable Portfolio Changes:

During the quarter, we initiated a new position in Tongcheng-Elong Holdings, an online travel agency in China focused on domestic trips. Domestic travel has already resumed to nearly pre-pandemic levels in China and we expect a continued strong recovery. Another new position is Xpeng Inc., which makes electric cars in China for local consumers. While there are many electric vehicle manufacturers in China, Xpeng maintains a strong focus on new technology, including autonomous driving research. The company’s electric cars are priced very competitively within China, and the travel range per charge is very good. Within the health care sector, we also exited a couple of positions in order to take profits and concentrate our holdings within the sector, increasing our weight to Innovent Biologics where we continue to see compelling opportunities for long-term growth.

Outlook:

Looking ahead, we could see additional market volatility as the global economy continues to adapt to life amid the pandemic. We believe many parts of Asia may be well positioned to regain its economic footing because of effective, ongoing public health responses to reducing COVID transmissions. Managing the virus is key to maintaining economic activity. In our view, China remains an important market for regional investors, as it is currently the only large economy that the International Monetary Fund (IMF) forecasts may have positive economic expansion in 2020. Although stock prices for our portfolio holdings have risen in recent quarters, these valuations are backed by strong underlying company fundamentals. Many of our portfolio companies have generated positive year-over-year revenue growth. We seek to invest in companies that we want to own for five years or longer, so investing with a long-term focus remains key. We anticipate that companies with strong organic structural growth have the potential to perform better. Sectors such as health care, Internet services, software and online education may provide attractive opportunities for long-term investors.

 

As of 09/30/2020, the securities mentioned comprised the Matthews Asia Innovators Fund in the following percentages: Sea, Ltd. ADR, 5.8%; Silergy Corp., 1.6%; Tongcheng-Elong Holdings, Ltd., 1.6%; XPeng, Inc. ADR, 2.7%; Innovent Biologics, Inc., 3.4%. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 12/31/2020
1YR 3YR 5YR 10YR Since Inception Inception Date
86.72% 25.35% 22.31% 14.87% 7.05% 12/27/1999

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 1.19%
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MEGMX

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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.