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Matthews China Fund MCHFX

Snapshot
  • High-conviction equity portfolio seeks companies benefiting from China’s domestic consumption
  • All-cap fundamental GARP approach driven by on-the-ground, proprietary research
  • Combines long-term core holdings with more opportunistic ideas to provide consistency through cycles

02/19/1998

Inception Date

5.41%

YTD Return

(as of 06/11/2021)

$28.46

Price

(as of 06/11/2021)

$1.80 billion

Fund Assets

(as of 05/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews China 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 China. 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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 02/19/1998
Fund Assets $1.80 billion (05/31/2021)
Currency USD
Ticker MCHFX
Cusip 577-130-701
Portfolio Turnover 52.6%
Benchmark MSCI China Index MSCI China All Shares Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.09%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund
MCHFX
2.13% -0.90% 6.52% 50.40% 14.27% 23.11% 8.38% 11.29% 02/19/1998
MSCI China Index
0.78% -4.24% 1.75% 38.88% 8.53% 17.01% 7.51% 5.75%
MSCI China All Shares Index
2.81% -1.48% 3.62% 45.41% 10.91% 15.00% n.a. n.a.
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund
MCHFX
-4.58% 2.56% 2.56% 60.74% 13.47% 21.25% 8.45% 11.19% 02/19/1998
MSCI China Index
-6.29% -0.43% -0.43% 43.81% 8.41% 16.29% 7.49% 5.70%
MSCI China All Shares Index
-6.35% -1.50% -1.50% 46.04% 8.71% 13.30% n.a. n.a.
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews China Fund
MCHFX
43.05% 34.56% -21.42% 59.37% -5.18% 2.41% -4.42% 6.84% 11.96% -18.93%
MSCI China Index
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10% -18.24%
MSCI China All Shares Index
33.61% 27.87% -23.15% 41.43% -7.69% -2.88% 23.64% 1.39% 19.53% -17.76%

MSCI China Index since inception value calculated from 2/28/98.

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 03/31/2021)

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 82 funds
  • 3 YEAR
  • out of 82 funds
  • 5 YEAR
  • out of 71 funds
  • 10 YEAR
  • out of 51 funds
  • 1 YEAR
  • 2nd
  • 49 out of 101 funds
  • 3 YEAR
  • 2nd
  • 30 out of 75 funds
  • 5 YEAR
  • 1st
  • 8 out of 63 funds
  • 10 YEAR
  • 2nd
  • 18 out of 44 funds
  • SINCE INCEPTION
  • 2nd
  • 4 out of 14 funds

Ratings agency calculation methodology

Portfolio Managers

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

Portfolio Characteristics

(as of 03/31/2021)
54
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

13.7x
P/E using FY1 estimates
12.5x
P/E using FY2 estimates
$191.9 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 05/31/2021)
Name Sector % Net Assets
Alibaba Group Holding, Ltd. Consumer Discretionary 10.0
Tencent Holdings, Ltd. Communication Services 9.3
China Merchants Bank Co., Ltd. Financials 4.5
China Construction Bank Corp. Financials 4.2
China International Capital Corp., Ltd. Financials 4.2
JD.com, Inc. Consumer Discretionary 4.1
AIA Group, Ltd. Financials 3.2
CITIC Securities Co., Ltd. Financials 3.1
Meituan Consumer Discretionary 2.5
Pharmaron Beijing Co., Ltd. Health Care 2.2
TOTAL 47.3

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 03/31/2021)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure

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

China Exposure Portfolio Weight
SAR (Hong Kong) 41.7
A Shares 32.5
H Shares 16.6
Overseas Listed Companies (OL) 6.1
China-affiliated corporations (CAC) 1.3
Cash and Other Assets, Less Liabilities 1.8

Definitions: SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. China A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

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 $0.06025 $0.17213 $0.10568 $0.33806 1.3% 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.

Commentary

Period ended March 31, 2021

For the quarter ending March 31, 2021, the Matthews China Fund returned 2.56% (investor class) and 2.64% (institutional class) while its primary benchmark, the MSCI China Index returned -0.43%. The Fund’s secondary benchmark, the MSCI China All Shares Index, returned -1.50%.

Market Environment:

China’s equity markets were volatile in the first quarter. While stock prices rose early in the quarter, broad-market gains in the benchmarks were erased by quarter end. Stocks that enjoyed significant price gains in 2020 within the information technology, consumer staples and discretionary sectors took a breather while cyclically oriented, “recovery” names within energy, real estate, industrials and materials outperformed. Overall, the sell-off in Chinese shares seems technical as opposed to fundamentally driven. Earnings growth expectations continue to reflect optimism in corporate profits supporting current valuations. Price weakness seems to reflect more of a herd mentality of local Chinese retail investors trying to lock-in 2020 gains and to take advantage of political headlines and bilateral tensions.

Chinese economic growth prospects and data prints illustrate robust recovery, but not enough to spur central bank policy tightening beyond what markets have already experienced. Rotation from growth to cyclical names could continue as industrial profits are expected to surge year over year. At the same time, growth-oriented companies within sectors such as consumer discretionary, health care, communication services and consumer staples have room to resume their climb as prices have corrected meaningfully since mid-February. Valuations have come down but still remain at relatively higher levels and we welcome a further healthy correction of the market.

Performance Contributors and Detractors:

A contributor among individual stocks was software provider Weimob. The company serves merchants using Tencent’s WeChat Mall, with a focus on small and medium-size enterprises (SMEs) that are trying to digitize their operations. Many SMEs are increasingly willing to embrace software solutions to increase productivity. The rise in online shopping and delivery due to the pandemic contributed to demand for Weimob’s software solutions. Another contributor was video content company Bilibili. The company, which caters to young viewers, attracted new users as the pandemic accelerated demand for online entertainment and social media interaction. We see Bilibili emerging as a new, distinct social media platform in its own right. With a growing user base and distinctive value proposition for its users, we find the company to have attractive long-term prospects.

On the other hand, consumer appliance maker Midea Group, which produces white goods including refrigerators and washing machines, was a detractor. We believe Midea is well positioned to capture rising consumer spending and consumer upgrades. Share prices were weak in the quarter amid general market volatility in China, but we continue to like the company’s long-term growth prospects. New Oriental Education and Technology was another detractor. Demand for private education services remains strong, as students compete for a limited number of slots for college admission. We expect education to remain an important part of consumer spending in China and continue to monitor the position. As government policies have recently tightened around after school tutoring, we continue to monitor the impact of this on New Oriental.

From a sector perspective, stock selection in consumer discretionary and information technology contributed to relative performance. On the other hand, stock selection in industrials detracted, while stock selection in the health care sector was roughly neutral.

Notable Portfolio Changes:

We rotated a bit of capital during the quarter. Chinese growth stocks took a breather in the first quarter of 2021, giving up some of their earlier gains from 2020, creating buying opportunities. Taking an all-shares approach to investing in Chinese equities, we found interesting opportunities in the Hong Kong (H-shares) market in terms of both valuation and quality. New positions in the Hong Kong market included the Industrial and Commercial Bank of China, one of China’s largest banks. We believe the financials sector is interesting given its attractive valuations and this has been an overlooked sector in China’s equity markets despite maintaining a consistent pace of growth. Turning to China’s domestic markets, new A-shares positions include Sinoma Science and Technology, which produces advanced, specialty materials for the automotive industry as well as for wind blades used in wind energy generation. The company may benefit from the growth in alternative energy installations for its wind blades business. Its fiberglass business is one where the industry dynamics are a lot more concentrated and attractive for future pricing improvements.

Outlook:

We remain optimistic about both the near-term and long-term growth prospects in China. Keeping the coronavirus under control is key to maintaining China’s V-shaped economic recovery. While China is only in the very early stages of its vaccination program, its strict border controls and data-driven approach to minimizing outbreaks remains highly successful. China’s approach to combatting the virus has been more effective than any other large economy. Because COVID is largely under control in China, people have been able to resume a normal life. Consumption is rising, auto sales are growing, restaurants have long lines and consumers feel comfortable gathering indoors.

Over the long-term, we expect that China’s growth will continue to be driven by growing domestic consumption. The depth and diversity of the opportunity set in China continues to expand, with a notable uptick in IPOs over the past 12 months. Key themes that we are following include technology upgrades, health and wellness trends, services that enhance quality of life and premium consumer goods. The team continues to look for attractive long-term growth opportunities driven by the Chinese consumer.

As of 03/31/21, the securities mentioned comprised the Matthews China Fund in the following percentages: Weimob, Inc., 1.0%; Tencent Holdings, Ltd., 10.3%; Bilibili, Inc. ADR, 2.0%; Midea Group Co., Ltd. A Shares, 1.9%; New Oriental Education & Technology Group, Inc. ADR, 0.4%; Industrial & Commercial Bank of China, Ltd. H Shares, 2.0%; Sinoma Science & Technology Co., Ltd. A Shares, 1.5%. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MCHFX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
60.74% 13.47% 21.25% 8.45% 11.19% 02/19/1998

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 1.09%

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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

 

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.