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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

1.69%

YTD Return

(as of 09/28/2021)

$19.63

Price

(as of 09/28/2021)

$415.05 million

Fund Assets

(as of 08/31/2021)

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 $415.05 million (08/31/2021)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 81.8%
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
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As of 08/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
4.68% -3.34% 5.48% 14.94% 11.95% 12.95% 11.08% 10.91% 11/30/2009
MSCI China Index
0.01% -13.69% -12.18% -5.00% 7.42% 10.97% 7.47% 5.93%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
2.74% 10.97% 12.11% 33.88% 11.82% 16.18% 10.96% 11.66% 11/30/2009
MSCI China Index
0.13% 2.32% 1.89% 27.54% 10.53% 16.75% 7.93% 7.39%
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 06/30/2021)

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.

Yield

(as of 06/30/2021)
0.71% 30-Day SEC Yield
2.50% Dividend Yield

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

Ratings

  • OVERALL
  • out of 84 funds
  • 3 YEAR
  • out of 84 funds
  • 5 YEAR
  • out of 72 funds
  • 10 YEAR
  • out of 53 funds
  • 1 YEAR
  • 3rd
  • 65 out of 101 funds
  • 3 YEAR
  • 3rd
  • 51 out of 78 funds
  • 5 YEAR
  • 3rd
  • 37 out of 64 funds
  • 10 YEAR
  • 1st
  • 8 out of 46 funds
  • SINCE INCEPTION
  • 1st
  • 1 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 06/30/2021)
Fund Benchmark
Number of Positions 48 736
Weighted Average Market Cap $82.8 billion $236.6 billion
Active Share 88.2 n.a.
P/E using FY1 estimates 14.3x 14.4x
P/E using FY2 estimates 12.5x 13.4x
Price/Cash Flow 8.2 10.6
Price/Book 1.9 2.2
Return On Equity 14.9 12.5
EPS Growth (3 Yr) 18.7% 41.3%

Sources: BNY Mellon Investment Servicing (US) Inc., Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 08/31/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 6.1
Shanghai Baosight Software Co., Ltd. Information Technology 4.3
China Suntien Green Energy Corp., Ltd. Energy 4.2
Bosideng International Holdings, Ltd. Consumer Discretionary 3.5
Postal Savings Bank of China Co., Ltd. Financials 3.3
Silergy Corp. Information Technology 3.1
SITC International Holdings Co., Ltd. Industrials 3.1
CITIC Telecom International Holdings, Ltd. Communication Services 3.0
BYD Co., Ltd. Consumer Discretionary 2.9
Shimao Services Holdings, Ltd. Real Estate 2.9
TOTAL 36.4

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 06/30/2021)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure

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 95.5
Cash and Other Assets, Less Liabilities 4.5
China Exposure Portfolio Weight
SAR (Hong Kong) 50.1
H Shares 16.8
A Shares 8.1
Overseas Listed Companies (OL) 7.8
B Shares 7.2
China-affiliated corporations (CAC) 4.0
Unassigned 1.5
Cash and Other Assets, Less Liabilities 4.5

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)
06/28/2021 06/29/2021 $0.37761 $0.00000 $0.00000 $0.37761 1.7% N.A.
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 June 30, 2021

For the first half of 2021, the Matthews China Dividend Fund returned 12.11% (Investor Class) and 12.14% (Institutional Class), while its benchmark, the MSCI China Index, returned 1.89% over the same period. For the quarter ending June 30, the Fund returned 10.97% (Investor Class) and 11.01% (Institutional Class), while the benchmark returned 2.32%.

Market Environment:

Chinese equity markets recovered in the second quarter, post a volatile first quarter, driven by resilient first quarter results coming out of the A-shares. Many investors anticipated a strong market rally approaching the Chinese Communist Party’s 100-year anniversary, however this optimistic scenario was never truly realized. During May, the Chinese government began to release the 7th population census data, which was delayed by a month. One clear trend within the census data is that the Chinese population continues to age, and birth rates have been trending down. The once-a-decade census data has many long-term implications, and Chinese authorities seem eager to take action to reverse the aging population trend. Later in May, the Chinese government announced that married couples will now be allowed to have three children, further relaxing its family planning policy. In addition, a series of surprisingly harsh and negative policy measures targeting the after-school tutoring industry has been rumored to be implemented starting this summer. The intention of these measures seems directly related to the escalating education cost of children, which many families cited as a key reason for not having more kids.

Performance Contributors and Detractors:

During the first half of 2021, the Fund’s significant outperformance relative to its benchmark was mostly driven by security selection, especially in the information technology, real estate and consumer discretionary sectors. On the other hand, our security selection in the materials sector and underweight to the health care sector have been the biggest drags on relative performance.

SITC International Holdings Co., Ltd., the leading intra-Asia regional container shipping company, has continued to benefit from escalating shipping rates globally, making it the top contributor to absolute performance during the first half of the year. Shimao Service Holdings, a property management company, and China Suntien Green Energy Corporation, a natural gas utility company with business exposure in wind energy, are the second- and third-highest performance contributors. It is worth mentioning that both companies had periods of significant share price sell-off last year due to reasons not related to their business fundamentals. As a long-term investor, we added to our positions during the sell-offs, and we are pleased to see these holdings become top performance contributors during the period.

On the contrary, recent portfolio addition Haier Smart Home Co., a company engaged in the research, development, production and sale of smart home appliances, was the largest performance detractor for the first half. As various commodity prices have increased, investors are worried about whether the company’s profit margin will be under pressure. For now, we believe Haier still has room to improve its margin compared with industry peers, and its global presence increases the company’s ability to pass on its increased costs. Cathay Media and Education Group Inc., which operates both for-profit higher education and TV drama production businesses, is the second largest performance detractor, as its anticipated tuition cap set by the Chinese government could be lower than the market anticipated—we are closely monitoring this situation.

Notable Portfolio Changes:

During the second quarter, we initiated a position in the Chinese e-commerce giant Alibaba Group Holding as the company’s valuation was still depressed by last year’s failed Ant Financial IPO. We appreciate Alibaba’s still-healthy cash flow generation and dominant position in e-commerce, online payment and cloud computing in China. Additionally, the company’s share buyback program is becoming recurring—we see this as almost equivalent to a recurring dividend payout policy.

During the sell-off in Taiwan’s equity markets in May trigged by a COVID-19 outbreak, we rotated capital from semiconductor company MediaTek Inc. and used the proceeds to partly fund new investments in E Ink Corporation and Silergy Corp. MediaTek has performed very well since we initiated the position, but we think the company’s attractive fundamentals and growth prospects have largely been reflected in its valuation. E Ink is the leading supplier of displays for e-readers globally, and as people spend more time looking at computer screens, we believe they will become more concerned regarding potential resultant eye health issues, especially among children. We believe E Ink’s unique display solution is well-suited to alleviate the issue. Silergy is a leading China-based logic chip design house. We believe the company has ample market share to gain from global competitors, as the import substitution trend continues in China’s chip industry.

We also exited our positions in Excellence Commercial and Facilities Property Management Group Ltd. and HKBN Ltd., as we are increasingly less convinced of their growth potential.

Outlook:

We remain constructive on China’s equity earnings growth outlook and continue to actively seek out investments at reasonable valuations. China is one of the first countries to normalize monetary policies post the COVID-19 pandemic, and therefore it may have more monetary and fiscal flexibility to support the economy as needed. However, in the near term, due to high base effect and increased regulatory risk, there could be down-side risk to Chinese corporates’ earnings. When these potential earnings downgrades are fully discounted, the market should refocus on structural growth drivers to corporate earnings.

 

As of June 30, 2021, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages: SITC International Holdings Co., Ltd., 2.7%; Shimao Services Holdings, Ltd., 3.9%; China Suntien Green Energy Corp., Ltd., 3.3%; Haier Smart Home Co., Ltd., 1.6%; Cathay Media and Education Group, Inc., 0.8%; Alibaba Group Holding, Ltd., 2.5%; E Ink Holdings, Inc., 1.5%; and Silergy Corp., 2.7%. The Fund held no positions in MediaTek Inc., Excellence Commercial and Facilities Property Management Group Ltd., and HKBN Ltd. Current and future portfolio holdings are subject to change and risk. There is no guarantee that a company will pay or continue to increase dividends.

Earnings growth is not representative of the fund’s future performance.

Average Annual Total Returns - MCDFX as of 06/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
33.88% 11.82% 16.18% 10.96% 11.66% 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 06/30/2021
30-Day SEC Yield 0.71%
Dividend Yield 2.50%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2021, 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.

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.

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

 

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.