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Matthews Asia Growth Fund
MPACX

Snapshot
  • Unconstrained growth strategy investing across Asia Pacific’s developed, emerging and frontier markets
  • Focus on the most profitable and attractive growth opportunities in Asia
  • Highly-differentiated portfolio offers exposure to names often under-represented in broader global equity strategies

10/31/2003

Inception Date

-3.84%

YTD Return

(as of 09/22/2023)

$20.04

NAV

(as of 09/22/2023)

+0.19

1 Day NAV Change

(as of 09/22/2023)

Objective

Long-term capital appreciation.

Strategy

Under normal circumstances, the Matthews Asia Growth 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 companies located in Asia. The Fund may also invest in the convertible securities, of any duration or quality, of Asian companies. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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 and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 10/31/2003
Fund Assets $457.66 million (08/31/2023)
Currency USD
Ticker MPACX
Cusip 577-130-867
Portfolio Turnover 47.5%
Benchmark MSCI All Country Asia Pacific Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.13%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund - MPACX
10/31/2003
MPACX
-3.67% 1.07% -0.34% -3.13% -10.48% -2.65% 3.46% 6.50%
MSCI All Country Asia Pacific Index
-4.87% 3.26% 6.11% 5.29% 0.51% 2.29% 5.00% 6.08%
As of 06/30/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Growth Fund - MPACX
10/31/2003
MPACX
0.39% -3.69% -1.01% -3.65% -8.55% -3.18% 2.99% 6.53%
MSCI All Country Asia Pacific Index
3.48% 1.43% 6.35% 6.44% 3.81% 2.38% 5.04% 6.15%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews Asia Growth Fund - MPACX
MPACX
-33.12% -14.65% 46.76% 26.18% -16.25% 39.39% 0.92% -0.05% 1.49% 19.35%
MSCI All Country Asia Pacific Index
-16.92% -1.19% 20.07% 19.74% -13.25% 32.04% 5.21% -1.68% 0.29% 12.19%

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 06/30/2023)

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 10 funds
  • 3 YEAR
  • out of 10 funds
  • 5 YEAR
  • out of 10 funds
  • 1 YEAR
  • 4th
  • 18 out of 19 funds
  • 3 YEAR
  • 4th
  • 16 out of 16 funds
  • 5 YEAR
  • 4th
  • 15 out of 16 funds
  • 10 YEAR
  • 3rd
  • 10 out of 14 funds
  • SINCE INCEPTION
  • 2nd
  • 4 out of 9 funds

Ratings agency calculation methodology

Portfolio Managers

Taizo  Ishida photo
Taizo Ishida

Lead Manager

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Co-Manager

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Co-Manager

Portfolio Characteristics

(as of 06/30/2023)
Fund Benchmark
Number of Positions 47 1,531
Weighted Average Market Cap $97.1 billion $87.6 billion
Active Share 81.8 n.a.
P/E using FY1 estimates 20.1x 14.1x
P/E using FY2 estimates 17.4x 12.6x
Price/Cash Flow 13.5 7.8
Price/Book 2.8 1.6
Return On Equity 10.6 14.7
EPS Growth (3 Yr) 27.0% 15.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2023)
-11.41%
Alpha
1.07
Beta
74.18%
Upside Capture
131.86%
Downside Capture
-0.46
Sharpe Ratio
-1.08
Information Ratio
11.44%
Tracking Error
71.74

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 08/31/2023)
Name Sector Country % Net Assets
PT Bank Rakyat Indonesia Persero Tbk Financials Indonesia 4.9
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 4.1
Bajaj Finance, Ltd. Financials India 4.0
Keyence Corp. Information Technology Japan 3.9
Disco Corp. Information Technology Japan 3.4
Japan Elevator Service Holdings Co., Ltd. Industrials Japan 3.4
Daiichi Sankyo Co., Ltd. Health Care Japan 3.4
Tencent Holdings, Ltd. Communication Services China/Hong Kong 3.2
BeiGene,?Ltd. Health Care China/Hong Kong 2.9
Maruti Suzuki India, Ltd. Consumer Discretionary India 2.9
TOTAL 36.1

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.

Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 06/30/2023)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 22.8 14.7 8.1
Health Care 18.6 6.4 12.2
Financials 17.0 18.9 -1.9
Information Technology 12.4 18.4 -6.0
Industrials 9.0 12.5 -3.5
Communication Services 7.7 8.1 -0.4
Consumer Staples 4.1 5.6 -1.5
Energy 3.5 2.9 0.6
Materials 3.3 7.2 -3.9
Real Estate 0.0 3.4 -3.4
Utilities 0.0 2.0 -2.0
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

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

Country Fund Benchmark Difference
Japan 43.7 33.3 10.4
China/Hong Kong 25.1 22.5 2.6
India 15.0 9.3 5.7
Indonesia 5.2 1.3 3.9
Taiwan 4.5 9.9 -5.4
Australia 3.6 10.9 -7.3
Singapore 1.2 2.1 -0.9
South Korea 0.0 7.8 -7.8
Thailand 0.0 1.2 -1.2
Malaysia 0.0 0.8 -0.8
Philippines 0.0 0.4 -0.4
New Zealand 0.0 0.3 -0.3
Macau 0.0 0.1 -0.1
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 62.5 59.4 3.1
Large Cap ($10B-$25B) 18.5 21.5 -3.0
Mid Cap ($3B-$10B) 8.4 18.0 -9.6
Small Cap (under $3B) 8.9 1.0 7.9
Cash and Other Assets, Less Liabilities 1.8 0.0 1.8

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)
12/13/2022 12/14/2022 $0.00000 $0.00000 $0.57757 $0.57757 2.6% 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, 2023

For the first half of 2023, the Matthews Asia Growth Fund returned -1.01% (Investor Class) and -0.95% (Institutional Class), while its benchmark, the MSCI All Country Asia Pacific Index, returned 6.35% over the same period. For the quarter ending June 30, 2023, the Fund returned -3.69% (Investor Class) and -3.64% (Institutional Class), while the benchmark returned 1.43%.

Market Environment:

The story of 2023’s first half has inarguably been about China. The year started on a positive note as markets anticipated that China’s lifting of zero-COVID would meaningfully boost economic activity—but the anticipation quickly faded as China’s economy struggled to regain its footing and domestic sentiment proved a meaningful drag. Consequently, China’s market returns have been negative year-to-date. Further weighing on China’s macro picture has been the property market, which has contributed to dour sentiment as many Chinese hold their wealth via real estate. Property market downturns make many Chinese citizens feel relatively poorer which decreases the likelihood they will spend money and help the economy.

Beyond China’s shores, the macroeconomic picture hasn’t been much better with much of the West (notably the U.S. and Europe) still battling inflation—an extended effort that has resulted in notably higher interest rates. If there is a bright spot, it may be Japan where the markets are improving thanks to fundamentals which appear to be turning for the first time in several decades. Spurred on by the Tokyo Stock Exchange, Japan-domiciled companies are finally working to improve their price-to-book ratios via share buybacks. Many Japanese companies have also increased their dividend payout ratios, improving their value to shareholders. In our view, these changes are meaningful and substantive and we believe Japan may be at the beginning of long-needed structural change. Another market offering encouragement has been India, which is benefiting in part from moves by some companies to make their supply chains less dependent on China.

Performance Contributors and Detractors:

Regionally, our overweight and stock selection in China was the biggest detractor to relative performance in the first half of the year. Our underweight to Taiwan—a relative bright spot given ongoing geopolitical tensions around the semiconductor industry—was also a large detractor. Our holdings in Japan, while positive on an absolute basis, trailed the benchmark and detracted from performance. On the flip side, our stock selection in Indonesia and our overweight to India were strong contributors to performance.

At the sector level, relative weakness was concentrated in our health care exposure—which detracted from performance due to our overweight position and stock selections. Our selections in consumer discretionary and industrials, and our underweight in IT also detracted. Conversely, our stock selections in financials were a source of relative strength, as were our materials holdings.

At the individual holdings level, JD.com and InnoCare Pharma were among our bottom contributors in the first half. Chinese e-commerce giant JD.com suffered as Chinese consumers were slow to increase consumption in the wake of zero-COVID’s lifting. Though many investors have seemingly soured on the outlook, we maintain our conviction in the company’s quality and are attracted to its solid balance sheet with ample cash. Shares of China-based InnoCare Pharma declined sharply following the company’s announcement that its exclusive global licensing (ex-China) agreement with the U.S.’s Biogen to develop and market a BTK inhibitor for multiple sclerosis had been discontinued. As a result, we exited our position.

Among our top individual contributors were Legend Biotech and Shin-Etsu Chemical. China-based biopharmaceutical Legend Biotech has developed arguably a best-in-class CAR T-cell therapy for cancer—an area with few competitors. Given the company’s solid fundamentals, we like the outlook from here and its positioning in the space. Shares of Shin-Etsu Chemical, a premier Japanese semiconductor wafer company with large global market share, rose on the back of strength in semiconductor stocks. We favor the company’s solid fundamentals despite its exposure to the U.S. housing market as a dominant PVC maker. 

Notable Portfolio Changes:

During the last quarter, we initiated positions in Toyota and Mahindra & Mahindra. Japanese automaker Toyota has solid fundamentals, a long history as one of Japan’s premier companies and is exposed to the ongoing transition to electric vehicles (EVs). Similarly, Mahindra & Mahindra is an India-based automaker specializing in SUVs—a growing vehicle category in India which we expect to boost the company’s sales in the period ahead.

In addition to exiting InnoCare Pharma, we sold our positions in Taiwanese power management chip company Silergy and long-time holding Vietnam Dairy Products following conversations with both companies’ management teams which weakened our confidence in their outlooks. We opted to redeploy our capital into more compelling opportunities.

Outlook:

We don’t have a crystal ball that can tell us what will happen in China, which continues to be the primary concern. Many have called a bottom several times in China’s market only to see it decline further. It’s hard to see much of a reason for sentiment in China to shift meaningfully in the near term. The likelihood the government can effect a quick turnaround seems low.  We think, however, that an uptick in IPOs in the Hong Kong market should encourage global investors to participate in the market in the next three to six months.

Elsewhere, we are encouraged by the progress we’re seeing in Japan and expect it to continue along its current structural change path. Compounding our enthusiasm are valuations which, though certainly higher in the wake of the recent market rally, remain relatively cheap, in our view. By way of contrast, India, which also remains a relative bright spot, has much higher, and consequently less attractive, valuations. As we’ve gained confidence in Japan and its companies’ fundamentals, we’ve decreased our exposure to China while increasing our Japan holdings. 

Over the next six months, we would like to think sentiment will gradually improve—and that perhaps the rate-hike cycle will conclude in the West and markets will find more reasons to continue climbing the proverbial wall of worry. We will certainly watch with interest and are prepared to position the portfolio accordingly as events unfold.

View the Fund’s Top 10 holdings as of June 30, 2023. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MPACX as of 06/30/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-3.65% -8.55% -3.18% 2.99% 6.53% 10/31/2003

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 1.13%

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 and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

 

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.