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Matthews Asia Innovators Fund
MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

-2.56%

YTD Return

(as of 06/07/2023)

$11.02

NAV

(as of 06/07/2023)

-0.10

1 Day NAV Change

(as of 06/07/2023)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators 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 that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. 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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

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

Fund Facts
Inception Date 12/27/1999
Fund Assets $454.51 million (05/31/2023)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 118.1%
Benchmark MSCI All Country Asia ex Japan 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 1.18%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
-2.36% -4.27% -4.95% -8.04% 1.68% 3.17% 9.16% 4.16%
MSCI All Country Asia ex Japan Index
-1.81% -0.47% 0.38% -7.72% 3.30% -0.28% 3.90% 5.33%
As of 03/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
3.21% 2.48% 2.48% -4.95% 10.95% 4.83% 10.56% 4.53%
MSCI All Country Asia ex Japan Index
3.51% 4.39% 4.39% -8.54% 7.29% 0.38% 4.36% 5.55%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews Asia Innovators Fund - MATFX
MATFX
-24.80% -13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61%
MSCI All Country Asia ex Japan Index
-19.36% -4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34%

MSCI AC Asia Ex Japan Index since inception value calculated from 12/31/99.

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 03/31/2023)

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 48 funds
  • 3 YEAR
  • out of 48 funds
  • 5 YEAR
  • out of 46 funds
  • 10 YEAR
  • out of 32 funds
  • 1 YEAR
  • 2nd
  • 10 out of 32 funds
  • 3 YEAR
  • 1st
  • 8 out of 31 funds
  • 5 YEAR
  • 1st
  • 2 out of 30 funds
  • 10 YEAR
  • 1st
  • 1 out of 18 funds
  • SINCE INCEPTION
  • 4th
  • 8 out of 9 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Inbok  Song photo
Inbok Song

Co-Manager

Portfolio Characteristics

(as of 03/31/2023)
Fund Benchmark
Number of Positions 46 1,188
Weighted Average Market Cap $136.9 billion $116.4 billion
Active Share 72.0 n.a.
P/E using FY1 estimates 23.1x 13.2x
P/E using FY2 estimates 18.1x 11.6x
Price/Cash Flow 14.2 6.8
Price/Book 3.2 1.6
Return On Equity 9.4 14.9
EPS Growth (3 Yr) 13.4% 17.3%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2023)
3.23%
Alpha
1.25
Beta
134.96%
Upside Capture
113.34%
Downside Capture
0.35
Sharpe Ratio
0.27
Information Ratio
13.40%
Tracking Error
80.86

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2023)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 6.5
Samsung Electronics Co., Ltd. Information Technology South Korea 5.9
HDFC Bank, Ltd. Financials India 4.2
Tencent Holdings, Ltd. Communication Services China/Hong Kong 3.9
ASML Holding NV Information Technology Netherlands 3.6
NVIDIA Corp. Information Technology United States 3.2
ICICI Bank, Ltd. Financials India 3.1
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 2.8
Alchip Technologies, Ltd. Information Technology Taiwan 2.7
Bajaj Finance, Ltd. Financials India 2.6
TOTAL 38.5

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 03/31/2023)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 31.0 14.6 16.4
Communication Services 18.6 10.8 7.8
Information Technology 17.4 23.0 -5.6
Financials 9.8 20.4 -10.6
Consumer Staples 5.9 5.4 0.5
Industrials 5.5 6.7 -1.2
Real Estate 4.5 3.8 0.7
Health Care 4.2 3.8 0.4
Energy 1.5 3.6 -2.1
Materials 0.0 5.4 -5.4
Utilities 0.0 2.5 -2.5
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Country Fund Benchmark Difference
China/Hong Kong 61.8 43.7 18.1
India 9.8 14.6 -4.8
South Korea 8.9 13.4 -4.5
Taiwan 6.3 17.0 -10.7
Singapore 5.7 4.0 1.7
United States 3.2 0.0 3.2
Indonesia 1.5 2.1 -0.6
Vietnam 1.1 0.0 1.1
Thailand 0.0 2.4 -2.4
Malaysia 0.0 1.6 -1.6
Philippines 0.0 0.8 -0.8
Macau 0.0 0.3 -0.3
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 68.6 58.8 9.8
Large Cap ($10B-$25B) 20.9 20.5 0.4
Mid Cap ($3B-$10B) 5.3 19.2 -13.9
Small Cap (under $3B) 3.7 1.4 2.3
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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 $3.00231 $3.00231 20.4% 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 March 31, 2023

For the quarter ended March 31, 2023, the Matthews Asia Innovators Fund returned 2.48% (Investor Class) and 2.52% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 4.39% over the same period.

Market Environment:

Markets were seemingly disappointed in the first quarter as China’s economy didn’t take off as quickly as expected following the abandonment of its zero-COVID policy. While we still anticipate a normalization of economic activity, Chinese consumers have taken a conservative approach to resuming their standard spending patterns and that has weighed on overall sentiment and dampened investor enthusiasm. However, we expect that as companies report better earnings versus last year over the coming quarters, markets will continue recovering.

South Korea and Taiwan had relatively robust first quarters as their closer economic ties with the U.S.—which was surprisingly resilient in the period—helped bolster economic activity and, with it, markets. Elsewhere, India’s market declined as it consolidated some of its meaningful 2022 gains. In our view, valuations there remain quite high relative to other areas, which also weighed on the market.   

Performance Contributors and Detractors:

Regionally, our stock selection in China and Hong Kong was the biggest detractor to relative performance—with the latter impacted given its close economic and market ties to China. However, we maintain our conviction in our overweight exposure to China as we believe valuations remain compelling and that the post-COVID recovery, already underway, will continue. Our underweight to Taiwan also detracted from relative results as Taiwanese semiconductor companies in particular had a good quarter. Conversely, relative strength in stock selection was concentrated among our Singapore holdings.

At the sector level, our consumer discretionary overweight and stock selection were the biggest detractors given ongoing weakness among consumers. On the other hand, our real estate holdings were a relative tailwind as the sector seems to have bottomed and begun recovering from concerns in 2022 about a potential property bubble in China.

At the individual holdings level, JD.com and Kuaishou Technology were among the bottom contributors. Chinese e-commerce platform JD.com continues to face stiff competition. Its announced roughly $1 billion subsidy program for its merchants seemingly disappointed investors as it will likely weigh on margins moving forward. Shares of Chinese streaming and online marketing platform Kuaishou Technology declined as investors consolidated gains following the stock’s rally since October.

Conversely, Sea and KE Holdings were among the top individual contributors. Singapore-based e-commerce platform Sea reached profitability sooner than expected as it decided to exit some unprofitable markets—developments which were well-received by the market. We maintain a sizeable position in our portfolio as we believe Sea is well-positioned to continue improving profitability this year. Chinese online/offline real estate services provider KE Holdings performed well on the back of expectations China’s real estate market has bottomed and will improve from here.

Notable Portfolio Changes:

We increased our exposure to Samsung Electronics in the first quarter as its valuation is attractive—particularly against what we believe to be a cyclical bottom in the DRAM industry. Samsung is one of the dominant DRAM manufacturers, and we see the current short supply contributing to an improved overall pricing environment, which should in turn boost shares in the period ahead.

We also pared our exposure to Indian banks—including ICICI Bank and IndusInd Bank—as valuations have approached what we believe to be fair levels following solid 2022 performance. We continue to like Indian banks, though, and when valuations seem more attractive, we would consider increasing our exposure again. 

Outlook:

Though sentiment was negative in the first quarter—particularly in China—we believe it is improving. However, consumers still remain cautious as the effects of pandemic lockdowns will take some time to reverse. We consequently expect a gradual recovery in China though we continue seeing improvements across most industries. Anecdotally, our analysts on the ground are reporting that restaurants are full, travel is picking up and China’s government is allowing some group tours to more foreign countries. We ultimately expect a full normalization of travel and that countries will see as many Chinese tourists as—if not more than—before the pandemic.

We maintain our enthusiasm on China’s outlook, especially given valuations which reflect a slower-than-anticipated reopening story. Also contributing to our enthusiasm is our belief that the technology cycle (particularly for semiconductors) is likely to bottom in 2023’s first half and rebound in the second half—which should further contribute to positive sentiment improvements.

All that said, we expect China’s relationship with the U.S. to remain fragile moving forward—which we will diligently monitor in the period ahead. Outside of China, we remain cautious on the outlook for India as valuations are still relatively elevated and the backdrop seems to have largely stagnated.

 

Top 10 holdings as of March 31, 2023. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MATFX as of 03/31/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-4.95% 10.95% 4.83% 10.56% 4.53% 12/27/1999

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 1.18%

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. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

 

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.