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Asia Growth

Matthews India Fund MINDX

Snapshot
  • Unconstrained all-cap strategy focused on companies with a sustainable competitive edge and pricing power, which are able to perform throughout economic cycles
  • Fundamental bottom-up approach to seek well-run entrepreneurial companies with sustainable organic growth and trustworthy managements
  • Bias toward businesses that cater to rising domestic consumer demand and to policy-independent sectors

10/31/2005

Inception Date

23.47%

YTD Return

(as of 10/26/2021)

$32.46

Price

(as of 10/26/2021)

$817.57 million

Fund Assets

(as of 09/30/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews India Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. 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 10/31/2005
Fund Assets $817.57 million (09/30/2021)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 57.4%
Benchmark S&P Bombay Stock Exchange 100 Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
-0.53% 9.18% 21.22% 47.71% 13.23% 9.68% 11.09% 11.27% 10/31/2005
S&P Bombay Stock Exchange 100 Index
1.25% 12.23% 26.01% 57.47% 17.65% 14.05% 10.49% 11.40%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
-0.53% 9.18% 21.22% 47.71% 13.23% 9.68% 11.09% 11.27% 10/31/2005
S&P Bombay Stock Exchange 100 Index
1.25% 12.23% 26.01% 57.47% 17.65% 14.05% 10.49% 11.40%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews India Fund
MINDX
16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90% 31.54% -36.48%
S&P Bombay Stock Exchange 100 Index
13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70% 28.62% -36.66%

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 20 funds
  • 3 YEAR
  • out of 20 funds
  • 5 YEAR
  • out of 18 funds
  • 10 YEAR
  • out of 14 funds
  • 1 YEAR
  • 4th
  • 19 out of 22 funds
  • 3 YEAR
  • 4th
  • 18 out of 20 funds
  • 5 YEAR
  • 4th
  • 17 out of 18 funds
  • 10 YEAR
  • 2nd
  • 7 out of 14 funds
  • SINCE INCEPTION
  • n.a.
  • 1 out of 2 funds

Ratings agency calculation methodology

Portfolio Managers

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Lead Manager

Sharat  Shroff, CFA photo
Sharat Shroff, CFA

Co-Manager

Portfolio Characteristics

(as of 09/30/2021)
Fund Benchmark
Number of Positions 57 101
Weighted Average Market Cap $58.4 billion $69.9 billion
Active Share 50.9 n.a.
P/E using FY1 estimates 31.2x 24.4x
P/E using FY2 estimates 25.0x 20.8x
Price/Cash Flow n.a. 16.5
Price/Book 4.6 3.7
Return On Equity 17.2 16.2
EPS Growth (3 Yr) 15.2% 11.1%

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

Top 10 Holdings

(as of 09/30/2021)
Name Sector % Net Assets
Reliance Industries, Ltd. Energy 8.4
HDFC Bank, Ltd. Financials 7.0
Infosys, Ltd. Information Technology 6.3
ICICI Bank, Ltd. Financials 5.1
Bajaj Finance, Ltd. Financials 4.5
Tata Consultancy Services, Ltd. Information Technology 4.4
Shriram City Union Finance, Ltd. Financials 3.7
Kotak Mahindra Bank, Ltd. Financials 3.5
Info Edge India, Ltd. Communication Services 3.3
Avenue Supermarts, Ltd. Consumer Staples 3.1
TOTAL 49.3

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

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.

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 $0.17084 $0.62672 $0.79756 3.1% 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 India Fund returned 11.03% (Investor Class) and 11.07% (Institutional Class) while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned 12.28% over the same period. For the quarter ending June 30, the Fund returned 7.87% (Investor Class) and 7.91% (Institutional Class), while its benchmark returned 6.39%.

Market Environment:

Indian equity markets have been fairly resilient despite a vicious second COVID wave, punchy equity valuations and higher-than-normal inflation outlook. Overall economic sentiment at the start of the year was very robust, as consumer demand and industrial activity continued to recover from last year’s COVID-induced slowdown. Additionally, a pro-growth budget presented by India’s central government, with an emphasis on higher infrastructure spending in the coming years, helped boost consumer confidence. India’s central bank also continued with its accommodative monetary policy, despite inflationary pressures being visible across sectors. However, economic recovery was impaired as a second wave of COVID infections began to engulf India in April. The health impact of this second wave was far worse than the first wave, as it exposed the country’s inadequate health infrastructure, and consequently fatalities were much greater. The crisis began to ease somewhat after many state governments imposed localized lockdowns in the most affected cities and towns. While lockdowns in some parts of the country have continued, the month of June has seen a return to normalcy in mobility across the country.

Indian equities have provided positive returns over the last six months despite many adverse economic events. In part, this is because many Indians are diverting their financial savings from fixed deposits to equity markets given the low interest rates prevailing in the economy despite high inflation. As a result, the number of individual brokerage accounts have doubled in last 12 months.

Performance Contributors and Detractors:

For the first six month of the year, our strong stock selection in health care, information technology and consumer staples sectors contributed to performance. On the other hand, stock selection in financials, consumer discretionary and materials sectors detracted.

Security selection within the health care sector continued to be a bright spot. Laurus Labs, a mid-cap pharmaceutical company focused on producing medication targeting HIV disease treatment in poor countries in Africa, contributed the most to Fund’s absolute and relative performance during the first half of the year. From being an API (active pharmaceutical ingredient) manufacturer, Laurus Labs has evolved into a fully vertically integrated manufacturer, which has helped it gain market share and improve its margins. Laurus Labs is also diversifying into other types of therapies in an effort to reduce its reliance on anti-virals, which we think is a much larger market and will likely allow the company to scale its business beyond current levels.

On the other hand, Bandhan Bank Ltd., a financial services company providing full service banking including microfinance products to traditionally underserved markets, detracted the most during the period. Bandhan Bank has had many external headwinds negatively impact its business in the last few years. However, despite the headwinds, Bandhan Bank continues to be a very well capitalized, profitable company. We expect the business will begin to normalize as COVID vaccination efforts gather steam and the impact of the pandemic starts to recede.

Notable Portfolio Changes:

We made a few changes to the portfolio in the second quarter, including initiating a position in one of southern India’s largest cement producers. Ramco Cements is expected to increase its capacity in the next three to six months. We believe the large capacity expansion makes the company very well positioned to benefit from the pick up in infrastructure spending and construction activity, which we anticipate will focus slightly more in southern India as compared to previous years. We expect the additional cash flow generated would be used to de-lever the balance sheet and to positively benefit its equity shareholders.

Given the negative impact the second wave of COVID has had on India’s economy in general, and many households in particular, we have taken a more conservative approach to portfolio positioning. We have opted to remain in liquid and cash-rich businesses rather than more levered businesses. As a consequence, we decided to exit some of our smaller financial holdings, including DCB Bank Ltd. and Mahindra & Mahindra Financial Services Limited, where we believe credit quality has likely deteriorated and the road to recovery would be long.

Outlook:

While the second wave of COVID infections seems to have abated in India, there is already some indications of the potential for a third wave to start soon. It is also likely that in the near term, discretionary consumption may be reduced as household savings of many have been negatively impacted due to higher health care spending in recent months. However, as vaccination efforts in India continue to gather pace, we believe COVID’s impact on human health and India’s economy will continue to recede in the coming months.

Despite near-term COVID challenges, we remain optimistic about India’s cyclical recovery, aided by increased infrastructure spending and a likely pick up in private sector capital spending. We are also seeing signs of increased manufacturing activity in India and greater acceptance of the governments’ ”Make in India” initiative. We also anticipate that India’s central bank will continue with its accommodating monetary policy, even if inflation remains elevated.

Given the existing conditions, we will continue with our conservative approach to portfolio construction, which includes investing in businesses with strong balance sheets and cash flows, and that will benefit from cyclical economic recovery ahead.

As of June 30, 2021, the securities mentioned comprised the Matthews India Fund in the following percentages: Laurus Labs, Ltd., 2.3%; Bandhan Bank, Ltd., 2.2%; and Ramco Cements, LtdThe Fund held no positions in DCB Bank, Ltd. and Mahindra & Mahindra Financial Services, Ltd.

Current and future portfolio holdings are subject to change and risk.

 

Average Annual Total Returns - MINDX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
47.71% 13.23% 9.68% 11.09% 11.27% 10/31/2005

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 1.15%

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.