01/03/1995
Inception Date
11.44%
YTD Return
(as of 06/11/2021)
$6.82
Price
(as of 06/11/2021)
$155.44 million
Fund Assets
(as of 05/31/2021)
Long-term capital appreciation
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.
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.
| Inception Date | 01/03/1995 | |
| Fund Assets | $155.44 million (05/31/2021) | |
| Currency | USD | |
| Ticker | MAKOX | |
| Cusip | 577-130-305 | |
| Portfolio Turnover | 39.6% | |
| Benchmark | Korea Composite Stock Price Index | |
| Geographic Focus | South Korea | |
| Gross Expense Ratio | 1.19% | |
KOSPI performance data may be readjusted periodically by the Korea Exchange due to certain factors, including the declaration of dividends.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
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.
Quartile & Rankings (as of 03/31/2021)
CATEGORY: Pacific Ex Japan Funds
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
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
Michael Oh is a Portfolio Manager at Matthews Asia. He manages the firm's Asia Innovators and Korea Strategies and co-manages the Asia Growth Strategy. Michael joined Matthews Asia in 2000 as a Research Analyst and has built his investment career at the firm. Michael was promoted from Research Analyst to Assistant Portfolio Manager in 2003. In 2006 and 2007, he was promoted to Lead Manager of the Matthews Asia Innovators Strategy and the Matthews Korea Strategy, respectively. From 2000-2003, Michael's research focused on the technology sector supporting multiple strategies managed by the founders of the firm. As a research analyst, he contributed investment ideas to the broader Matthews Asia investment teams. Michael received a B.A. in Political Economy of Industrial Societies from the University of California, Berkeley. He is fluent in Korean.
Co-Manager
Portfolio Manager
Elli Lee is a Portfolio Manager at Matthews Asia, and co-manages the firm's Korea Strategy. Prior to joining the firm as a Research Analyst in 2016, Elli worked at Bank of America Merrill Lynch for 10 years, most recently in Korean Equity Sales and previously as an Equity Research Analyst covering South Korea's engineering, construction, steel and education sectors. From 2003 to 2005, Elli was an Investor Relations Specialist at Hana Financial Group in Seoul. She received a B.A. in Economics from Bates College, and is fluent in Korean.
Source: BNY Mellon Investment Servicing (US) Inc.
Source: FactSet Research Systems
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 Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
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 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 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
Period ended March 31, 2021
For the quarter ending March 31, 2021, the Matthews Korea Fund returned 4.58% (Investor Class) and 4.54% (Institutional Class), while its benchmark, the Korea Composite Stock Price Index (KOSPI), returned 2.90%.
Market Environment:
Sentiment toward South Korea’s economy—home to a number of multinational corporations and boasting a strong export sector—improved on prospects for a continuing recovery in global economic growth. South Korean equities were modestly up in the first quarter 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 Korean stock prices higher.
Performance Contributors and Detractors:
The relative performance of the Fund was largely stock specific in the period. Internet services company Kakao performed well, driven by strong earnings growth visibility at its parent and subsidiary companies. Kakao continues to increase advertising revenue on its main platform, while some of its subsidiaries have value that may become unlocked through public market listing. KB Financial, which is among South Korea’s largest banks, was another contributor, driven by an earnings turnaround accompanied by historically low valuation. The company’s net interest margin is bottoming out from better lending yields, as the bank gains higher bargaining power from controlling its loan growth. Fee income of the financial holding company has improved from its brokerage business related to equity capital markets and mergers and acquisitions.
Pharmaceutical and Chemical company Yuhan Corp was a detractor amid weak fourth quarter 2020 results from lukewarm prescription sales in its domestic market. We remain constructive on Yuhan for its promising product pipeline and the value of its existing business lines. Consumer goods company LG Household & Health Care was a detractor due to the prolonged pandemic effects of reduced travel. However, we believe LG Household & Health Care will continue to gain market share among China’s luxury cosmetic consumers, while reopening of overseas travel will offer additional earnings growth to the company.
Notable Portfolio Changes:
During the quarter, we initiated a position in Park Systems Corp., which develops and manufactures atomic force microscopes for industrial use. The company has the largest market share globally among its peer group. As node migration becomes more complicated, atomic force microscopes are gaining traction in the optical inspection lens industry. The company’s total addressable market continues to grow as Park Systems helps customers to lower defect ratio of the final products.
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 benefit from the global recovery, especially those companies focused on innovation. A slower-than-expected vaccination program in Korea could dampen domestic consumption over the short term, but we expect long-term consumption to remain steady.
As before, 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. We continue to look for companies that can benefit from domestic consumption, as well as those companies headquartered in the country that are effectively competing and innovating in global markets.
As of 3/31/21, the securities mentioned comprised the Matthews Korea Fund in the following percentages: Kakao Corp., 4.7%; KB Financial Group, Inc., 4.3%; Yuhan Corp., 1.8%; LG Household & Health Care, Ltd., Pfd., 3.8%; Park Systems Corp., 1.2%. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MAKOX as of 03/31/2021
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.