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Global Emerging Markets

Matthews Emerging Markets Small Companies Fund MSMLX

The Fund's name changed from the Matthews Asia Small Companies Fund to the Matthews Emerging Markets Small Companies Fund on April 30 2021.

Snapshot
  • Seeks alpha in innovative, capital efficient entrepreneurial companies in emerging markets
  • Focus on firms that have a strong competitive advantage through pricing power, distribution capability, and/or differentiated technologies and services
  • Bias toward businesses that cater to rising domestic consumer demand

09/15/2008

Inception Date

14.31%

YTD Return

(as of 06/11/2021)

$29.64

Price

(as of 06/11/2021)

$361.72 million

Fund Assets

(as of 05/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Small Companies 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 Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time.

Risks

Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 09/15/2008
Fund Assets $361.72 million (05/31/2021)
Currency USD
Ticker MSMLX
Cusip 577-125-206
Portfolio Turnover 111.9%
Benchmark MSCI Emerging Markets Small Cap Index MSCI All Country Asia ex Japan Small Cap Index
Geographic Focus Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe.
Fees & Expenses
Gross Expense Ratio 1.67%
Net Expense Ratio 1.40%

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 Emerging Markets Small Companies Fund
MSMLX
4.03% 5.60% 10.57% 63.38% 14.00% 14.80% 7.45% 12.72% 09/15/2008
MSCI Emerging Markets Small Cap Index
2.54% 10.46% 17.15% 75.07% 9.36% 12.28% 4.41% 8.39%
MSCI All Country Asia ex Japan Small Cap Index
1.13% 8.27% 17.16% 72.25% 9.25% 11.93% 5.10% 8.95%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Small Companies Fund
MSMLX
-4.16% 0.35% 0.35% 79.73% 10.81% 12.55% 6.96% 12.03% 09/15/2008
MSCI All Country Asia ex Japan Small Cap Index
1.24% 9.56% 9.56% 87.24% 6.84% 10.09% 4.58% 8.50%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Emerging Markets Small Companies Fund
MSMLX
43.68% 17.38% -18.05% 30.59% -1.44% -9.43% 11.39% 7.19% 23.92% -20.03%
MSCI All Country Asia ex Japan Small Cap Index
26.60% 7.58% -18.63% 33.84% -2.05% -3.28% 2.56% 7.16% 22.76% -26.66%

Effective April 30, 2021, in connection with changes to the Fund’s name and principal investment strategies, the primary benchmark changed from the MSCI All Country Asia ex Japan Small Cap Index to the MSCI Emerging Markets Small Cap Index.

MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.

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 03/31/2021)

MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.

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 56 funds
  • 3 YEAR
  • out of 56 funds
  • 5 YEAR
  • out of 50 funds
  • 10 YEAR
  • out of 29 funds
  • 1 YEAR
  • 1st
  • 8 out of 42 funds
  • 3 YEAR
  • 2nd
  • 17 out of 41 funds
  • 5 YEAR
  • 3rd
  • 24 out of 35 funds
  • 10 YEAR
  • 3rd
  • 16 out of 24 funds
  • SINCE INCEPTION
  • 1st
  • 3 out of 21 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Robert  Harvey, CFA photo
Robert Harvey, CFA

Co-Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Portfolio Characteristics

(as of 03/31/2021)
69
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

24.9x
P/E using FY1 estimates
18.3x
P/E using FY2 estimates
$4.2 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 05/31/2021)
Name Sector Country % Net Assets
Shriram City Union Finance, Ltd. Financials India 5.8
Silergy Corp. Information Technology China/Hong Kong 5.8
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.6
Phoenix Mills, Ltd. Real Estate India 3.5
Hugel, Inc. Health Care South Korea 3.3
Military Commercial Joint Stock Bank Financials Vietnam 3.2
Mobile World Investment Corp. Consumer Discretionary Vietnam 2.3
Peijia Medical, Ltd. Health Care China/Hong Kong 2.3
Ashok Leyland, Ltd. Industrials India 2.2
Lemon Tree Hotels, Ltd. Consumer Discretionary India 2.1
TOTAL 34.1

 

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Matthews Emerging Markets Small Companies Fund Composition as of April 30 2021 Matthews Emerging Markets Small Companies Fund Composition

Portfolio Breakdown (%)

(as of 03/31/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Not all countries are included in the benchmark index(es).

The Fund defines Small Companies as companies with market capitalization generally between $100 million and $5 billion or the largest company included in the Fund’s primary benchmark. The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

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.

Portfolio Breakdown benchmark reflects the MSCI All Country Asia ex Japan Small Cap Index as of 3/31/21.

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 $0.05487 $0.00000 $0.01710 $0.07197 0.3% 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
As of April 30 2021, Matthews Asia Small Companies Fund name has been changed to the Matthews Emerging Markets Small Companies Fund

For the quarter ending March 31, 2021, the Matthews Asia Small Companies Fund returned 0.35% (Investor Class) and 0.43% (Institutional class) while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, returned 9.56%.

Market Environment:

As the global economic recovery continued to broaden out, Asia small caps rallied in the quarter, outperforming their large-cap counterparts. India, China and Thailand led equity price gains among small companies in the region as investors sought buying opportunities among more cyclically sensitive industries, amid prospects for a faster-than-expected return to growth. Elsewhere, equity prices in Indonesia and the Philippines dipped slightly as investors feared a slower recovery due to the continued fallout from COVID-19 pandemic that is still not fully under control.

The market saw a very strong intra-quarter rotation from growth-oriented stocks to more value-oriented and economically sensitive stocks globally in February as the U.S. Treasury yields rose. The real yields also rose as the market started to factor in a strong U.S. economic recovery due to Biden administration’s additional fiscal stimulus measures worth US$1.9 trillion and expectations around a future infrastructure spending plan. Against this backdrop, Asian currencies were mixed in the quarter, with the Indian rupee (-0.06%) and the Chinese renminbi (-0.23%) roughly flat with the U.S. dollar. The South Korean won (-4.02%) and Indonesian rupiah (-3.27%) experiencing more notable drops.

Performance Contributors and Detractors:

Overall, our exposure to growth names in China hurt our relative performance during the quarter. Many of the stocks that had done well during the previous year had given up some of those gains including in areas such as technology, health care and solar supply chain. Some of the fast growing consumer staples names also retraced.

Flat glass, a leading solar glass maker in China, detracted from performance during the quarter. As the prices rose sharply late last year and stayed strong, industry players made additional capacity announcements and there was also increased supply of non-solar glass to be used as a substitute of solar glass. We have always expected the pricing to normalize and Flat glass continues to execute well and is rapidly expanding its capacity over the coming quarters. We expect it to continue to benefit from the long-term demand and attractive margin profile in future driven by its scale and operational excellence. Other detractors included consumer staples like Yantai China pet foods and Sichuan Teway food group as investors rotated towards companies with weaker balance sheets and profitability metrics but that could potentially benefit from broader economic recovery.

Turning to contributors, Shriram City Union in India, an Indian non-banking financial company, was a notable contributor with its better than expected credit cost performance, very strong capital ratios and a strong franchise in its niches. Prospects for improved profits led by normalizing credit costs on 2021 after a pandemic struck 2020, and the potential for loan growth pick up as economic activity normalizes have benefitted the company.

SITC International Holdings, an intra-Asia, shipping specialist contributed positively as shipping rates globally went up; and it saw strong demand trend for its key routes connecting North and South East Asia as economic activity rebounded.

Notable Portfolio Changes:

During the quarter we added to Bank Tabungan Negara, an Indonesian mortgage lender. Bank Tabungan  is a leader in the lower-income mortgage lending. After a six-year downturn in the Indonesian property market, conditions are looking conducive to a rebound driven by pent up demand, very favorable regulatory changes, lower rates, better affordability and prospects of strong recovery post-COVID. We believe the company is well positioned to benefit from those trends and also from strong recovery in profitability driven by credit cost normalization. We also exited some small positions such as Kangji Medical as we found more attractive investment opportunities elsewhere and consolidated our holdings.

Outlook:

Looking ahead, earnings growth, liquidity and valuations all appear supportive of Asia’s equity markets. We expect strong corporate earnings across Asia in 2021 as the global recovery continues to expand. Across the region we see sufficient liquidity. While we have not seen as much uptake in credit, any pick up in credit issuance should further support economic growth. Across the region, we see a return to normalcy, leading to better economic prospects for businesses. Parts of Asia have progressed from recovery to expansion, while others like India and Indonesia are still getting back to pre-pandemic levels of activity. Some of the economic indicators in India are pointing to a steady improvement but we await confirmation of the trend in stronger credit activity. We believe small companies are poised for attractive growth as economies continue their gradual reopening process.

 

As of 03/31/2021, the securities mentioned comprised the Matthews Asia Small Companies Fund in the following percentages: Flat Glass Group Co., Ltd. H Shares, 0.9%; Yantai China Pet Foods Co., Ltd. A Shares, 1.3%; Sichuan Teway Food Group Co., Ltd. A Shares, 0.6%; Shriram City Union Finance, Ltd., 4.8%; SITC International Holdings Co., Ltd., 3.1%; PT Bank Tabungan Negara Persero, 1.8%. The Fund held no positions in Kangji Medical. Current and future holdings are subject to change and risk. Investing in small- and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than larger companies.

Average Annual Total Returns - MSMLX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
79.73% 10.81% 12.55% 6.96% 12.03% 09/15/2008

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 1.67%
Net Expense Ratio 1.40%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2022. Please see the Fund’s prospectus for additional details.

Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

 

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.