02/19/1998
Inception Date
-5.16%
YTD Return
(as of 04/17/2024)
$11.02
NAV
(as of 04/17/2024)
+0.03
1 Day NAV Change
(as of 04/17/2024)
Long-term capital appreciation
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.
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.
These and other risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 02/19/1998 | |
| Fund Assets | $431.47 million (03/31/2024) | |
| Currency | USD | |
| Ticker | MCHFX | |
| Cusip | 577-130-701 | |
| Portfolio Turnover | 49.6% | |
| Benchmark | MSCI China Index MSCI China All Shares Index | |
| Geographic Focus | China - China includes its administrative and other districts, such as Hong Kong | |
| Gross Expense Ratio | 1.12% | |
| Objective | Long-term capital appreciation |
| Strategy | Under normal circumstances, the Matthews China Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in China. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health. |
| Risks |
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.
The risks associated with investing in the Fund can be found in the prospectus |
MSCI China Index since inception value calculated from 2/28/98.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
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.
(as of 03/31/2024)
CATEGORY: China Region
| OVERALL | 3 stars | out of 92 funds |
| 3 YEAR | 2 stars | out of 92 funds |
| 5 YEAR | 3 stars | out of 73 funds |
| 10 YEAR | 3 stars | out of 52 funds |
(as of 03/31/2024)
CATEGORY: China Region Funds
| 1 YEAR | 3rd | 57 out of 102 funds |
| 3 YEAR | 3rd | 63 out of 90 funds |
| 5 YEAR | 2nd | 31 out of 73 funds |
| 10 YEAR | 2nd | 14 out of 51 funds |
| SINCE INCEPTION | 1st | 3 out of 14 funds |
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Lead Manager
Portfolio Manager
Andrew Mattock is a Portfolio Manager at Matthews and manages the firm’s China, China Small Companies, China A-Share and China Discovery Strategies and co-manages the Pacific Tiger, China Dividend and Emerging Markets Equity Strategies. Prior to joining Matthews in 2015, he was a Fund Manager at Henderson Global Investors for 15 years, first in London and then in Singapore, managing Asia Pacific equities. Andrew holds a Bachelor of Business majoring in Accounting from ACU. He began his career at PricewaterhouseCoopers and qualified as a Chartered Accountant.
Co-Manager
Portfolio Manager
Winnie Chwang is a Portfolio Manager at Matthews and manages the firm’s China Small Companies, China Dividend and China Discovery Strategies and co-manages the China, Pacific Tiger and Asia Dividend Strategies. She joined the firm in 2004 and has built her investment career at the firm. Winnie earned an MBA from the Haas School of Business and received her B.A. in Economics with a minor in Business Administration from the University of California, Berkeley. She is fluent in Mandarin and conversational in Cantonese.
Co-Manager
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews and manages the firm’s China Dividend and China A-Shares Strategies and co-manages the China and Asia ex Japan Total Return Equity Strategies. Prior to joining Matthews in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Investor share class.
Sources: Zephyr StyleADVISOR
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
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.
Visit our Glossary of Terms page for definitions and additional information.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
The MSCI India Index is a free float-adjusted market capitalization-weighted index of Indian equities listed in India.
The MSCI Korea Index is a free float-adjusted market capitalization-weighted index of Korean equities listed in Korea.
Indexes are for comparative purposes only and it is not possible to invest directly in an index.
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.
Commentary
December 31, 2023
For the year ending December 31, 2023, the Matthews China Fund returned -19.22% (Investor Class) and -19.11% (Institutional Class), while its benchmark, the MSCI China Index, returned -11.04% over the same period. For the fourth quarter, the Fund returned -5.16% (Investor Class) and -5.16% (Institutional Class), while the benchmark returned -4.21%.
Market Environment
2023 was a disappointing year for Chinese equities and the Chinese economy overall. It’s disappointing, in our view, not just in the sense of the underwhelming recovery of Chinese consumer spending post-COVID lockdowns but also due to the lack of any significant stimulus measures by the government. While the government started to gradually loosen nearly all property purchase-restrictions across most cities in China, the expectations of potential home buyers regarding future house prices and their own income levels have changed. As a result, these policy changes have barely helped to arrest the slump in the real estate market. As the year progressed, investors gradually gave up on the idea that the Chinese central government would step in to engineer a stronger consumption rebound.
The challenging real estate market and the soft consumption environment create a potential formula for deflation, in our view. From what we can see, many entrepreneurs, whose animal spirits were curbed during the COVID period, are now hesitating to start any new investments in this environment. From a geopolitical standpoint, the highly anticipated Biden-Xi summit in San Francsico in November didn’t curb the ongoing concerns of international investors.
In terms of markets, quarterly results of leading Chinese companies, especially large-cap technology firms, seem to be hinting toward upward surprises in terms of topline revenue and earnings. During the last quarter of the year, information technology (IT) and utilities were the only positive sectors while real estate was weakest followed by consumer staples and communication services. Chinese small and mid caps ended lower but outperformed weak large and mega caps during the quarter.
Performance Contributors and Detractors
From a sector perspective, our lack of exposure to materials and stock selection within IT and consumer staples contributed the most to relative performance in 2023. Among individual holdings, the top stock performer was Pinduoduo (PDD), one of China’s largest e-commerce platforms that started its businesses with a focus on lower-tier city, price sensitive consumers directly through its interactive shopping experience. PDD delivered strong results during the year in what has been a weaker e-commerce market in China. Gross merchandize value (GMV) growth and monetization for PDD has remained on track. PDD’s strong execution continues to make it a standout in its peer group.
Tencent Music Entertainment Group, the largest music streaming service entity in China, was another outperformer. We think the market is coming to terms with the steady decline of its social entertainment business being offset by what is a growing willingness of consumers to pay for music streaming services. Music services in China have an opportunity to realize higher profitability than global peers such as Spotify, in our view, because the top labels in China account for a smaller share of music streaming traffic and therefore don’t have as much bargaining power in China as they do in the West.
On the other hand, stock selection in real estate, consumer discretionary and financials detracted from performance for the year. Turning to individual holdings, property developer CIFI Holdings was among the biggest detractors to relative performance. CIFI’s stock only resumed trading at the end of September after a long suspension and its negative share price performance had an accumulated impact over the time it was suspended. China’s largest food delivery service and internet platform company Meituan, a well-held name in global portfolios, also detracted as a risk-off appetite toward China led to a selloff. JD.com was the biggest detractor during the year. The e-commerce platform has generated concerns overs its growth prospects and has been weighed down by China’s muted recovery. While internet platform companies’ valuations have pulled back considerably, we believe they largely remain profitable and scale-oriented businesses. We continue to be overweight in consumer discretionary, led by an exposure in platform companies which we feel are very cheap and continue to deliver earnings improvement.
Notable Portfolio Changes
We streamlined the number of positions in the portfolio from 64 to 51 over the course of the year. Our overall exposure in mainland-listed companies has been reduced from around 38% in Dec. 2022 to 28% at the end of the year. Many smaller A-shares positions that were more expensive were exited from the portfolio as cheaper valuations, given the pull back, enabled us to build more into better quality holdings. In the more recent quarters, we have incrementally added to our positions in certain communication services names such as Tencent Music and social platform company Kuaishou Technology (driven by low valuations as well as increased willingness among consumers to spend and pay for online services). We’ve also added to consumer names such as Yum China and Tsingtao Brewery (driven by the pull back of these names leading to attractive valuations for what are still renowned brands in China).
Outlook
2023 has been generally a challenging year for China. Despite the lifting of COVID restrictions in the country, the government’s lack of stimulus generally led to weakening economic support. At the same time, property market woes continued, impacting sentiment and business confidence in the country. While more supportive measures have been rolled out later in the year to address property market concerns, a meaningful inflection remains to be seen.
Looking ahead, we are cautiously looking for a stabilization of the deterioration in property markets. While we do not expect a significant warming of geo-politics, the ongoing current status quo of a more constructive post-APEC posturing would be welcomed by the market. Valuations continued to trend down in 2023, and the broader China market hovers around similar levels as 2009 despite better quality businesses and earnings profile. We continue to believe that patience is needed in these market environments and, that it could ultimately pay off if the market turns. We intend to stick to our knitting and aim to deliver consistent growth-at-a reasonable price strategy for our clients.
View the Fund’s Top 10 holdings as of December 31, 2023. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MCHFX as of 03/31/2024
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
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.