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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

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)

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 $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
Fees & Expenses
Gross Expense Ratio 1.19%

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 Korea Fund
MAKOX
0.15% 5.73% 8.50% 71.52% 10.07% 11.18% 8.43% 7.01% 01/03/1995
Korea Composite Stock Price Index
2.50% 8.35% 9.67% 80.06% 11.29% 13.93% 5.61% 4.72%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Korea Fund
MAKOX
1.91% 4.58% 4.58% 89.64% 6.65% 9.97% 8.39% 6.90% 01/03/1995
Korea Composite Stock Price Index
1.67% 2.90% 2.90% 92.44% 7.90% 11.45% 5.30% 4.50%
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 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

  • 1 YEAR
  • 1st
  • 4 out of 42 funds
  • 3 YEAR
  • 4th
  • 40 out of 41 funds
  • 5 YEAR
  • 4th
  • 32 out of 35 funds
  • 10 YEAR
  • 2nd
  • 7 out of 24 funds
  • SINCE INCEPTION
  • 2nd
  • 4 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 03/31/2021)
30
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

11.8x
P/E using FY1 estimates
9.9x
P/E using FY2 estimates
$136.0 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 05/31/2021)
Name Sector % Net Assets
Samsung Electronics Co., Ltd., Pfd. Information Technology 16.1
Samsung Electronics Co., Ltd. Information Technology 6.2
Kakao Corp. Communication Services 5.3
SK Hynix, Inc. Information Technology 4.7
KB Financial Group, Inc. Financials 4.3
LG Chem, Ltd., Pfd. Materials 4.3
Shinhan Financial Group Co., Ltd. Financials 4.2
LG Household & Health Care, Ltd., Pfd. Consumer Staples 4.1
Hana Financial Group, Inc. Financials 3.8
Samsung SDI Co., Ltd. Information Technology 3.6
TOTAL 56.6

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

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 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
1YR 3YR 5YR 10YR Since Inception Inception Date
89.64% 6.65% 9.97% 8.39% 6.90% 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.