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
1.07%
YTD Return
(as of 03/04/2021)
$19.85
Price
(as of 03/04/2021)
$398.28 million
Fund Assets
(as of 01/31/2021)
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 | $398.28 million (01/31/2021) | |
| Currency | USD | |
| Ticker | MCDFX | |
| Cusip | 577-125-305 | |
| Portfolio Turnover | 81.80% | |
| Benchmark | MSCI China Index | |
| Geographic Focus | China - China includes its administrative and other districts, such as Hong Kong | |
Fees & Expenses
| Gross Expense Ratio | 1.15% | |
Performance
- Monthly
- Quarterly
- Calendar Year
As of 01/31/2021
As of 12/31/2020
For the years ended December 31st
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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
Ratings (as of 12/31/2020)
CATEGORY: China Region
Quartile & Rankings (as of 12/31/2020)
CATEGORY: China Region Funds
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
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.
Portfolio Managers
Sherwood Zhang, CFA
Lead Manager
Sherwood Zhang, CFA
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews Asia. He manages the firm's China Dividend Strategy and co-manages the Asia Dividend and Asia ex Japan Dividend Strategies. Prior to joining Matthews Asia in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Yu Zhang, CFA
Co-Manager
Yu Zhang, CFA
Portfolio Manager
Yu Zhang is a Portfolio Manager at Matthews Asia. He manages the firm's Asia Dividend and Asia ex Japan Dividend Strategies, and co-manages the China Dividend Strategy. Prior to joining Matthews Asia in 2007 as a Research Associate, Yu was an Analyst researching Japanese companies at Aperta Asset Management from 2005 to 2007. Before receiving a graduate degree in the U.S., he was an Associate in the Ningbo, China office of Mitsui & Co., a Japanese general trading firm. Yu received a B.A. in English Language from the Beijing Foreign Studies University, an MBA from Suffolk University and an M.S. in Finance from Boston College. He is fluent in Mandarin.
S. Joyce Li, CFA
Co-Manager
S. Joyce Li, CFA
Portfolio Manager
S. Joyce Li is a Portfolio Manager at Matthews Asia and co-manages the firm's China Dividend, Asia ex Japan Dividend, and Asia Dividend Strategies. Prior to joining the firm in 2016, she was a Portfolio Manager and Principal at Marvin & Palmer Associates, where she co-managed equity investments in the Asia Pacific markets between 2007 and 2016. Joyce started her investment career as a Senior Investment Associate at Wilmington Trust. Joyce received an MBA with honors from the Wharton School of the University of Pennsylvania and a M.S. in Computer Science from the University of Virginia. She is fluent in Mandarin and Cantonese.
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 02/28/2021)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
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
Explore Our China Research and Insights
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 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 December 31, 2020
For the year ending December 31, 2020, the Matthews China Dividend Fund returned 24.22% (Investor Class) and 24.37% (Institutional Class), while its benchmark, the MSCI China Index, returned 29.67%. For the quarter ending December 31, 2020, the Matthews China Dividend Fund returned 11.12% (Investor and Institutional Classes), while its benchmark, the MSCI China Index, returned 11.21%.
Market Environment:
Following some early missteps in addressing the pandemic, Chinese authorities acted decisively, limiting internal travel and controlling its borders while working with world health organizations to control the outbreak. In addition, policy actions meant to assist small and medium-size enterprises were implemented including an increase in loan quotas, lowering of borrowing rates, a delay in loan repayments and value added tax (VAT) relief. The result was an early 2020 outperformance of Chinese equities which added support to neighboring country markets.
The second quarter of 2020 was lackluster even though anecdotes from our local offices and official economic data implied that recovery was well under way, however, the uncertainty around the national security law in Hong Kong has shadowed the performance of Chinese equities, especially the market in Hong Kong.
Chinese equities posted strong returns in the third quarter but most of those gains were registered in the first two weeks of the quarter—reflecting increased tensions between the U.S. and China. Nevertheless, consumer discretionary stocks (autos, travel and retail) were the strongest performers due to economic data pointing to a full recovery underway. Chinese equities were strong going into the last quarter of 2020, however, the surprising cancellation of IPO caused investors to worry about China’s regulatory risk towards giant internet companies, causing overall sentiment to wane somewhat.
Performance Contributors and Detractors:
For the full year of 2020, the Fund’s underweight in the financials sector and security selection in the real estate sector contributed the most to performance. On the other hand, security selection in communication services and consumer staple sectors detracted from Fund performance. Our total-return investment approach provides the flexibility of investing in both dividend-paying stocks and dividend growth stocks. To achieve a balance between dividend growth and current high yield, we maintained certain high dividend yield stocks such as telecom operators. However, these names are likely to underperform during a rally driven by ample global liquidity.
During the fourth quarter, SITC International Holding, a shipping company with focus on intra-Asia routes, was the top contributor to Fund performance. Container shipping rates rose rapidly around the Christmas shopping season which benefited the company. We believe SITC is also well positioned to benefit from regional trade among Asian countries boosted by the Regional Comprehensive Economic Program (RCEP). The Fund’s second largest contributor was Leader Harmonious Drive Systems, the precision parts company we added during the third quarter, as the market started to realize the company’s competence on the global stage. Cathay Media and Education Group was the third largest performance contributor, as it completed an acquisition of an after school tutoring service company, further expanding its art and performance education business into a bigger potential market.
On the contrary, medical equipment maker AK Medical was the largest performance detractor during the quarter, as the market worried that the centralized procurement of AK Medical’s products could depress its margin. We are closely monitoring the situation. Shimao Services Holding, a residential property manager, was the second largest performance detractor. We participated in the company’s IPO due to its reputation of quality service. However, in a relatively short period of time, the market was flooded with many property managers’ IPO, and when negative news about its parent company’s bad acquisition emerged, Shimao’s shares sold off. In our view, this has very little impact on the company’s own operation, thus, we added to our position during the market selloff. HKBN, the broadband operator in Hong Kong, was the third largest performance detractor during the quarter. The company reported dismal outlook as its customers have been significantly impacted by COVID-19. However, we are still confident in HKBN’s management to maintain its growth longer term.
Notable Portfolio Changes:
During the fourth quarter, we re-initiated positions in Postal Saving Bank of China. As China’s economy stabilizes further, we believe the asset quality of the banking sector should also improve. We also initiated a position in Travelsky Technology, the dominant airfare ticketing agency in China. Although its earnings had been impacted by bad debt incurred by one of its customers (a troubled airliner in financial distress), we believe it is largely a one-off situation and should not impact its fundamentals. As Chinese and global air travel could improve further into 2021, we think TravelSky should be well positioned to ride the recovery.
In addition, we rotated capital from Zhong Sheng Group to China Yongda Auto. As the valuation gap between these two companies widens, we think there is more upside potential for Yongda Auto to catch up as the market may be late to recognize its improvements in operations. We also exited our position in China Tower as we were concerned that it could be impacted by Donald Trump’s executive order to exclude Chinese companies with a military link, as the largest shareholders of China Tower are China Mobile, China Telecom and China Unicom. We also exited KWG Group as we viewed the company’s further upside was limited going forward after it spun off its property service arm.
Outlook:
Unlike many developed economies’ unlimited quantitative monetary easing policy, China’s monetary aggregates have been balanced for several months, offering Chinese policymakers a future cushion to stimulate the economy, if needed. At the same time, China’s rebounding economy and solid mid-teens consensus earnings growth estimates should support current valuations.
China’s newly released five-year plan could support businesses benefiting from the “dual-circulation” announcement focused on domestic demand and self-sufficiency in key areas of technology, innovation, health care and the digitalization of its economy. Meanwhile China has not given up its participation in the global economy—just in the last quarter alone, China concluded two key trade negotiations, RCEP (Regional Comprehensive Economic Cooperation) with mostly Asian counties and a bilateral investment agreement with the European Union. The investment agreement with the European Union includes for the first time, specific language to rein in behavior of State Owned Enterprises. This shows quite significant progress of the long waited reform. Geopolitical factors, especially U.S. – China relations under the Biden administration, will also influence the unfolding of Asia market in the new year. We believe a total-return approach, balancing dividend income with dividend growth, should continue to help us uncover attractive market opportunities in 2021.
As of 12/31/2020, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages: SITC International Holdings Co., Ltd., 3.9%; Leader Harmonious Drive Systems Co., Ltd. A Shares, 2.7%; Cathay Media and Education Group, Inc, 2.3%; AK Medical Holdings, Ltd., 0.8%; Shimao Services Holdings, Ltd., 1.5%; HKBN, Ltd., 2.0%; Postal Savings Bank of China Co., Ltd. H Shares, 3.0%; TravelSky Technology, Ltd. H Shares, 2.0%; China Yongda Automobiles Services Holdings, Ltd., 1.9%. The Fund held no positions in Zhongsheng Group Holdings, Ltd.; China Tower Corp., Ltd. H Shares; China Mobile, Ltd.; China Telecom Corp., Ltd.; China United Network Communications Group Co., Ltd.; KWG Group Holdings, Ltd. Current and future portfolio holdings are subject to change and risk.
Average Annual Total Returns - MCDFX as of 12/31/2020
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
Yields as of 12/31/2020
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.