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Asia Growth

Matthews Korea Fund MAKOX

Snapshot
  • Unconstrained all cap strategy focused on secular growth opportunities in Korea
  • Fundamental bottom-up approach seeks companies with sustainable business models, strong governance and improving competitive advantages against global peers
  • Highly-differentiated portfolio offers exposure to new economy growth drivers overlooked by index

01/03/1995

Inception Date

-0.49%

YTD Return

(as of 09/28/2021)

$6.09

Price

(as of 09/28/2021)

$143.32 million

Fund Assets

(as of 08/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Korea 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 South Korea. 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 01/03/1995
Fund Assets $143.32 million (08/31/2021)
Currency USD
Ticker MAKOX
Cusip 577-130-305
Portfolio Turnover 39.6%
Benchmark Korea Composite Stock Price Index
Geographic Focus South Korea
Fees & Expenses
Gross Expense Ratio 1.19%

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 Korea Fund
MAKOX
-2.16% -4.52% 3.60% 35.32% 11.37% 9.23% 8.70% 6.75% 01/03/1995
Korea Composite Stock Price Index
-0.63% -4.19% 5.08% 44.23% 12.38% 10.97% 6.38% 4.51%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Korea Fund
MAKOX
3.31% 7.19% 12.09% 64.55% 13.01% 11.47% 8.74% 7.12% 01/03/1995
Korea Composite Stock Price Index
0.87% 7.37% 10.63% 69.36% 14.14% 13.55% 5.79% 4.74%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Korea Fund
MAKOX
40.77% 3.80% -22.21% 43.70% -6.32% 15.16% -0.73% 10.11% 24.05% -6.45%
Korea Composite Stock Price Index
39.76% 4.46% -20.07% 37.71% 0.98% -4.61% -8.30% 2.90% 18.54% -13.01%

KOSPI performance data may be readjusted periodically by the Korea Exchange due to certain factors, including the declaration of dividends.

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.

Due to current market volatility associated with the COVID-19 pandemic, funds may experience significant negative short-term performance.

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

  • 1 YEAR
  • 1st
  • 4 out of 36 funds
  • 3 YEAR
  • 3rd
  • 19 out of 35 funds
  • 5 YEAR
  • 4th
  • 24 out of 30 funds
  • 10 YEAR
  • 1st
  • 4 out of 21 funds
  • SINCE INCEPTION
  • 2nd
  • 3 out of 7 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Elli  Lee photo
Elli Lee

Co-Manager

Portfolio Characteristics

(as of 06/30/2021)
Fund Benchmark
Number of Positions 32 802
Weighted Average Market Cap $133.7 billion $123.1 billion
Active Share 69.9 n.a.
P/E using FY1 estimates 10.2x n.a.
P/E using FY2 estimates 9.3x n.a.
Price/Cash Flow 6.6 6.1
Price/Book 1.3 1.3
Return On Equity 8.8 6.3
EPS Growth (3 Yr) -5.8% -21.3%

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 % Net Assets
Samsung Electronics Co., Ltd., Pfd. Information Technology 16.5
Samsung Electronics Co., Ltd. Information Technology 6.2
Kakao Corp. Communication Services 4.3
NAVER Corp. Communication Services 4.3
KB Financial Group, Inc. Financials 4.2
SK Hynix, Inc. Information Technology 4.1
LG Chem, Ltd., Pfd. Materials 4.1
Shinhan Financial Group Co., Ltd. Financials 4.0
Kia Corp. Consumer Discretionary 3.6
Hyundai Motor Co., Ltd., Pfd. Consumer Discretionary 3.5
TOTAL 54.8

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 06/30/2021)
  • 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 $0.04356 $0.00000 $0.00000 $0.04356 0.7% 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 Korea Fund returned 12.09% (Investor Class) and 12.16% (Institutional Class), while its benchmark, the Korea Composite Stock Price Index, returned 10.63% over the same period. For the quarter ending June 30, 2021, the Matthews Korea Fund returned 7.19% (Investor Class) and 7.29% (Institutional Class), while the benchmark returned 7.37%.

Market Environment:

Sentiment towards South Korea’s economy improved on prospects for a continuing recovery in global economic growth. South Korean equities rose modestly year to date after posting Asia’s strongest performance in the fourth quarter and for 2020 as a whole. A combination of low valuations, a rebound in earnings and a cyclical bounce coming out of COVID-19 proved to be a confluence of upside catalysts that propelled South Korean stock prices higher during the second quarter of the year.

During the quarter, South Korean energy stocks were some of the strongest in the region followed by companies within communication services and industrials. Information technology, while registering slightly positive returns, was South Korea’s weakest sector followed by consumer staples and health care.

Performance Contributors and Detractors:

The Fund’s relative outperformance year to date was driven by strong stock selection, most notably within the communication services and information technology sectors. Kakao Corp. was the top  contributor to the Fund’s absolute performance year to date. Kakao is South Korea’s dominant chat platform, and has successfully added various platform features such as fintech, e-commerce and mobility services. The company continues to tap into underserved advertisement opportunities for platform merchants. Kakao’s share price appreciated strongly ahead of public listings of two of the company’s financial platform subsidiaries on the Korea Stock Exchange during the second half of 2021.

KB Financial Group, one of South Korea’s largest banks, was another significant contributor to absolute performance. While KB Financial’s stock trades at a deep discount to its historical valuation and that of its regional peers, company fundamentals remain solid. KB Financials’ credit costs are well controlled and we believe there is room for net interest income to improve with the potential for limited interest rate cuts.

Samsung Electronics, a multinational electronics manufacturer that is a world leader in smartphones and various components such as lithium-ion batteries, PC memory chips, image sensors and displays, was a detractor to absolute performance. Despite enjoying both solid PC memory prices and demand, investors’ concern about potential memory demand deterioration from the fourth quarter of 2021 into 2022 weighed on the stock. We believe Samsung Electronics is trading at an attractive valuation, and improving capital management practices such as improved shareholder policies along with sensible mergers and acquisitions can rerate the stock.

Notable Portfolio Changes:

During the second quarter, we added HYBE Corp. into the portfolio. HYBE is an artist management company that owns globally strong intellectual property (“IP”), including music copyrights with K-pop artists such as BTS and Seventeen. The company has built a unique social media platform that enables fans to communicate with the artists. Through this platform, HYBE has been able to generate a solid earnings stream, even during the pandemic in 2020 to 2021. It continues to add strong IP both organically and from external sources.

We also added SK Telecom Co. to the portfolio. SK Telecom is the largest wireless telecom carrier in South Korea, and is the largest shareholder of SK Hynix—a global leader in semiconductor manufacturing specializing in computer memory chips. SK Telecom recently announced a change in corporate structure by splitting its core telecom business from its other investment holding company. We believe this corporate action will further unlock value from SK Telecom’s investment assets and positively impact the company’s future decision-making process.

Outlook:

Looking ahead, we expect global consumption to gradually recover from the pandemic throughout the coming year. We remain constructive on companies in South Korea that may benefit from the global recovery, especially those companies focused on innovation. On the other hand, a slower-than-expected vaccination program in South Korea could dampen domestic consumption over the short term.

We believe active security selection is essential to capturing South Korea’s long-term growth potential. As bottom-up investors, we look for companies that can grow organically without the assistance of strong macroeconomic tailwinds, with an emphasis on those companies that can benefit from domestic consumption and are effectively competing and innovating in global markets.

As of June 30, 2021, the securities mentioned comprised the Matthews Korea Fund in the following percentages: Kakao Corp., 4.8%; KB Financial Group, Inc., 4.1%; Samsung Electronics Co., Ltd., 21.8%; HYBE Co., Ltd., 1.2%; SK Telecom Co., Ltd., 1.3%; and SK Hynix, Inc., 4.5%.

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

 

Average Annual Total Returns - MAKOX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
64.55% 13.01% 11.47% 8.74% 7.12% 01/03/1995

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%

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.