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Growth & Income

Matthews China Dividend Fund MCDFX

Snapshot
  • Total return strategy seeks to access the growth of China with lower volatility
  • Unconstrained all-cap portfolio with a quality bias
  • Flexible approach offers participation in both growth and value markets

11/30/2009

Inception Date

5.70%

YTD Return

(as of 01/26/2021)

$20.76

Price

(as of 01/26/2021)

$384.64 million

Fund Assets

(as of 12/31/2020)

Objective

Total return with an emphasis on providing current income.

Strategy

Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term.

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. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

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

Fund Facts
Inception Date 11/30/2009
Fund Assets $384.64 million (12/31/2020)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 65.69%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
6.21% 11.12% 24.22% 24.22% 8.75% 13.36% 9.88% 11.06% 11/30/2009
MSCI China Index
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 7.55%
As of 12/31/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
6.21% 11.12% 24.22% 24.22% 8.75% 13.36% 9.88% 11.06% 11/30/2009
MSCI China Index
2.77% 11.21% 29.67% 29.67% 9.22% 15.25% 7.84% 7.55%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews China Dividend Fund
MCDFX
24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93% 13.35% 27.81% -14.44%
MSCI China Index
29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10% -18.24%

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 12/31/2020)

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.

Yield

(as of 12/31/2020)
0.97% 30-Day SEC Yield
2.73% Dividend Yield

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 79 funds
  • 3 YEAR
  • out of 79 funds
  • 5 YEAR
  • out of 70 funds
  • 10 YEAR
  • out of 50 funds
  • 1 YEAR
  • 4th
  • 80 out of 94 funds
  • 3 YEAR
  • 3rd
  • 49 out of 73 funds
  • 5 YEAR
  • 3rd
  • 42 out of 63 funds
  • 10 YEAR
  • 1st
  • 8 out of 43 funds
  • SINCE INCEPTION
  • 1st
  • 4 out of 39 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Yu  Zhang, CFA photo
Yu Zhang, CFA

Co-Manager

S. Joyce Li, CFA photo
S. Joyce Li, CFA

Co-Manager

Portfolio Characteristics

(as of 12/31/2020)
47
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

15.5x
P/E using FY1 estimates
12.8x
P/E using FY2 estimates
$67.7 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 12/31/2020)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 7.3
Shanghai Baosight Software Co., Ltd. Information Technology 4.0
SITC International Holdings Co., Ltd. Industrials 3.9
Tsingtao Brewery Co., Ltd. Consumer Staples 3.4
Minth Group, Ltd. Consumer Discretionary 3.4
China International Capital Corp., Ltd. Financials 3.1
Postal Savings Bank of China Co., Ltd. Financials 3.0
Gree Electric Appliances, Inc. of Zhuhai Consumer Discretionary 2.8
MediaTek, Inc. Information Technology 2.7
Leader Harmonious Drive Systems Co., Ltd. Industrials 2.7
TOTAL 36.3

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 12/31/2020)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 21.0 35.2 -14.2
Communication Services 14.7 20.1 -5.4
Industrials 14.1 4.5 9.6
Financials 10.5 13.5 -3.0
Information Technology 10.2 6.7 3.5
Consumer Staples 6.3 4.5 1.8
Real Estate 6.0 3.6 2.4
Health Care 4.8 6.5 -1.7
Materials 4.8 2.1 2.7
Energy 2.6 1.6 1.0
Utilities 2.1 1.8 0.3
Cash and Other Assets, Less Liabilities 2.9 0.0 2.9

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

Asset Type Fund
Common Equities and ADRs 97.1
Cash and Other Assets, Less Liabilities 2.9
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 23.8 73.9 -50.1
Large Cap ($10B-$25B) 15.6 16.0 -0.4
Mid Cap ($3B-$10B) 35.0 9.2 25.8
Small Cap (under $3B) 22.8 1.0 21.8
Cash and Other Assets, Less Liabilities 2.9 0.0 2.9
China Exposure Portfolio Weight
SAR (Hong Kong) 45.4
H Shares 21.0
A Shares 9.8
B Shares 9.5
China-affiliated corporations (CAC) 4.0
Overseas Listed Companies (OL) 1.4
Unassigned 6.0
Cash and Other Assets, Less Liabilities 2.9

Definitions: SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. China A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

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 $0.03802 $0.00000 $0.00000 $0.03802 0.2% N.A.
06/24/2020 06/25/2020 $0.36498 $0.00000 $0.00000 $0.36498 2.3% 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 September 30, 2020

For the quarter ending September 30, 2020, the Matthews China Dividend Fund returned 7.46% (Investor Class) and 7.53% (Institutional Class), while its benchmark, the MSCI China Index, returned 12.57%.

Market Environment:

Chinese equities went through another volatile quarter in terms of political tension. U.S. – China tension escalated to a new height in July when the U.S. ordered China to close its consulate in Houston, and in retaliation, China ordered the closure of the U.S. consulate in Chengdu. Additionally, in early August, President Trump signed an executive order to ban popular apps Tiktok and WeChat in the U.S. on national security concern. However, due to the vague wording in the executive order, it was not clear how the ban would be implemented and how wide of an impact it would have on Tencent, which developed WeChat, creating stock price volatility.

The Chinese renminbi, along with other major currencies, strengthened against the U.S dollar during the quarter as the market priced in the risk of a prolonged shut down of the U.S. economy caused by COVID-19 and unlimited quantitative easing by the U.S. Federal Reserve.

Performance Contributors and Detractors:

During the third quarter, Shanghai Baosight Software was the top contributor to the Fund’s performance. The industrial software developer/data center operator reported 67% earnings growth for the second quarter as its new data center is put into operation. Auto parts supplier Minth Group rose as it further enters the supply chain for electric vehicles via its battery housing business and was the Fund’s second largest contributor to performance. The Fund’s third largest contributor was Powerlong Commerical Management, a shopping center property manager focused on lower tier cities in China.

On the other hand, a few names that performed well during the first half of the year became the largest performance detractors during this quarter due to profit taking. Sun Art Retail Group, the largest hyper market operator in China was the largest performance detractor, as markets started to worry that Chinese consumers will slow their spending. It is also facing emerging competition for grocery delivery from delivery platforms. Livzon Pharmaceutical Group also declined during the quarter due to profit taking. Additionally, the Fund’s significant underweight allocation and stock selection in the consumer discretionary sector detracted from performance. This is partly due to Alibaba Group’s outsized weight in the benchmark index and stellar performance during the quarter which the Fund does not own.

Notable Portfolio Changes:

During the quarter, we initiated positions in two A-share companies newly listed this year: Bafang Electric Suzhou and Leader Harmonious Drive System. Bafang manufactures components in electric bicycles, which is increasingly gaining popularity globally. Leader Harmonious Drive System is a maker of precision transmissions used in industrial robots. We believe both companies have high potential to rival their global competitors in their niche areas. In addition, we participated in two IPOs in the for-profit education industry: Cathay Media and Education and Neusoft Education Technology. Both companies are focused on niche academic fields such as media/performance and information technology.

We took profits from convenience store chain Chengu Hongqi and exited our position in the company but we will continue to monitor the company and its first foray outside of its home province. We also exited Sunevision Holdings, Hong Kong’s largest data center operator, given the increasing likelihood global internet companies may forego Hong Kong as a location to host their data due to concern over National Security Law implemented this year.

Outlook:

Chinese manufacturing data points to a continued V-shaped recovery, and retail sales data registered positive year- over-year growth during September. During the October 1st National Day golden week holiday, it is reported that half a billion Chinese consumers started vacationing domestically, and the packed tourist spots served as reminder of China’s consumer spending power outside of China before COVID-19. Thus, we believe domestic consumption still has ample room of growth in China.

Fiscal stimulus in China has been incremental in scope and highly targeted, a trend we expect may continue. Interest rates in China have moved higher, reflecting China’s economic resilience amid the pandemic. Looking ahead, we expect to see continued recovery in China’s economic activity. While China is not immune from a global slowdown, it may be better positioned than other large economies to maintain its long-term growth and we continue to seek and invest in attractive dividend-paying stocks with improving growth outlook.

As of 9/30/2020, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages:Tencent Holdings, Ltd., 7.7%; Shanghai Baosight Software Co., Ltd. B Shares, 4.3% Minth Group, Ltd., 3.0%; Powerlong Commerical Management Holdings, Ltd., 3.0%;  Livzon Pharmaceutical Group, Inc., H Shares, 3.0%; Bafang Electric Suzhou Co., Ltd. A Shares, 1.0%; Leader Harmonious Drive Systems Co., Ltd. A Shares, 1.0%; Cathay Media and Education Group, Inc., 0.6%; Neusoft Education Technology Co., Ltd., 0.7%. The Fund held no positions in Tiktok; Sun Art Retail Group Ltd.; Alibaba Group Holdings Limited; Chengu Hongqi Chaing Co., Ltd.; Sunevision Holdings Ltd. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MCDFX as of 12/31/2020
1YR 3YR 5YR 10YR Since Inception Inception Date
24.22% 8.75% 13.36% 9.88% 11.06% 11/30/2009

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%
Yields as of 12/31/2020
30-Day SEC Yield 0.97%
Dividend Yield 2.73%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 12/31/2020, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.

There is no guarantee that a company will pay or continue to increase dividends. Past performance is no guarantee of future results.

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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.