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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

2.75%

YTD Return

(as of 04/09/2021)

$20.18

Price

(as of 04/09/2021)

$404.04 million

Fund Assets

(as of 03/31/2021)

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 $404.04 million (03/31/2021)
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 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-0.05% 1.02% 1.02% 43.77% 8.42% 14.21% 10.11% 10.91% 11/30/2009
MSCI China Index
-6.29% -0.43% -0.43% 43.81% 8.41% 16.29% 7.49% 7.34%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund
MCDFX
-0.05% 1.02% 1.02% 43.77% 8.42% 14.21% 10.11% 10.91% 11/30/2009
MSCI China Index
-6.29% -0.43% -0.43% 43.81% 8.41% 16.29% 7.49% 7.34%
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 82 funds
  • 3 YEAR
  • out of 82 funds
  • 5 YEAR
  • out of 71 funds
  • 10 YEAR
  • out of 51 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 03/31/2021)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 8.8
SITC International Holdings Co., Ltd. Industrials 3.8
MediaTek, Inc. Information Technology 3.3
Postal Savings Bank of China Co., Ltd. Financials 3.2
Shanghai Baosight Software Co., Ltd. Information Technology 3.2
China Suntien Green Energy Corp., Ltd. Energy 3.1
CITIC Telecom International Holdings, Ltd. Communication Services 2.7
China Education Group Holdings, Ltd. Consumer Discretionary 2.5
Shimao Services Holdings, Ltd. Real Estate 2.5
Huaxin Cement Co., Ltd. Materials 2.4
TOTAL 35.5

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 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 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
43.77% 8.42% 14.21% 10.11% 10.91% 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.

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.