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Matthews China Fund
MCHFX

Snapshot
  • High-conviction equity portfolio seeks companies benefiting from China’s domestic consumption
  • All-cap fundamental GARP approach driven by on-the-ground, proprietary research
  • Combines long-term core holdings with more opportunistic ideas to provide consistency through cycles

02/19/1998

Inception Date

4.30%

YTD Return

(as of 06/17/2024)

$12.12

NAV

(as of 06/17/2024)

+0.10

1 Day NAV Change

(as of 06/17/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews China 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 China. 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 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.

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

Fund Facts
Inception Date 02/19/1998
Fund Assets $444.02 million (05/31/2024)
Currency USD
Ticker MCHFX
Cusip 577-130-701
Portfolio Turnover 49.6%
Benchmark MSCI China Index MSCI China All Shares 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 05/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund - MCHFX
02/19/1998
MCHFX
2.69% 10.88% 5.25% 0.47% -19.10% -0.64% 3.21% 7.31%
MSCI China Index
2.42% 10.21% 6.79% 4.45% -16.98% -2.25% 2.08% 2.87%
MSCI China All Shares Index
1.19% 6.70% 4.90% 0.05% -15.71% -0.70% n.a. n.a.
As of 03/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Fund - MCHFX
02/19/1998
MCHFX
2.45% -2.75% -2.75% -21.77% -20.20% -4.17% 2.45% 7.03%
MSCI China Index
0.95% -2.19% -2.19% -16.90% -18.79% -6.19% 1.42% 2.54%
MSCI China All Shares Index
0.65% -1.05% -1.05% -16.46% -15.93% -3.94% n.a. n.a.
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews China Fund - MCHFX
MCHFX
-19.22% -24.40% -12.26% 43.05% 34.56% -21.42% 59.37% -5.18% 2.41% -4.42%
MSCI China Index
-11.04% -21.80% -21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26%
MSCI China All Shares Index
-11.35% -23.47% -12.80% 33.61% 27.87% -23.15% 41.43% -7.69% -2.88% 23.64%

MSCI China Index since inception value calculated from 2/28/98.

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 03/31/2024)

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 92 funds
  • 3 YEAR
  • out of 92 funds
  • 5 YEAR
  • out of 73 funds
  • 10 YEAR
  • out of 52 funds
  • 1 YEAR
  • 3rd
  • 57 out of 102 funds
  • 3 YEAR
  • 3rd
  • 63 out of 90 funds
  • 5 YEAR
  • 2nd
  • 31 out of 73 funds
  • 10 YEAR
  • 2nd
  • 14 out of 51 funds
  • SINCE INCEPTION
  • 1st
  • 3 out of 14 funds

Ratings agency calculation methodology

Portfolio Managers

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Co-Manager

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Co-Manager

Hardy  Zhu photo
Hardy Zhu

Co-Manager

Portfolio Characteristics

(as of 03/31/2024)
Fund Benchmark
Number of Positions 59 704
Weighted Average Market Cap $97.3 billion $115.7 billion
Active Share 58.8 n.a.
P/E using FY1 estimates 10.7x 9.1x
P/E using FY2 estimates 9.6x 8.3x
Price/Cash Flow 7.8 5.6
Price/Book 1.4 1.2
Return On Equity 13.7 13.2
EPS Growth (3 Yr) 11.5% 9.0%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2024)
-0.77%
Alpha
1.02
Beta
108.83%
Upside Capture
104.27%
Downside Capture
-0.71
Sharpe Ratio
-0.16
Information Ratio
8.79%
Tracking Error
92.54

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2024)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 11.5
Alibaba Group Holding, Ltd. Consumer Discretionary 6.8
Meituan Class B Consumer Discretionary 5.3
China Merchants Bank Co., Ltd. Financials 4.8
PDD Holdings, Inc. Consumer Discretionary 4.4
China Construction Bank Corp. Financials 3.7
JD.com, Inc. Consumer Discretionary 3.6
PetroChina Co., Ltd. Energy 3.4
Ping An Insurance Group Co. of China, Ltd. Financials 3.2
Wuliangye Yibin Co., Ltd. Consumer Staples 2.8
TOTAL 49.5

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 03/31/2024)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 31.0 29.6 1.4
Financials 17.1 16.5 0.6
Communication Services 16.3 20.8 -4.5
Consumer Staples 8.9 5.2 3.7
Industrials 7.2 5.2 2.0
Information Technology 5.4 6.1 -0.7
Real Estate 5.0 2.2 2.8
Health Care 4.9 4.5 0.4
Energy 2.9 3.8 -0.9
Materials 1.1 3.5 -2.4
Utilities 0.0 2.6 -2.6
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 65.6 66.4 -0.8
Large Cap ($10B-$25B) 20.1 15.6 4.5
Mid Cap ($3B-$10B) 10.6 16.4 -5.8
Small Cap (under $3B) 3.5 1.7 1.8
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2
China Exposure Portfolio Weight
Hong Kong Listed Companies 59.6
Mainland China Listed Companies 27.5
ADR/GDR 11.7
Other 1.0
Cash and Other Assets, Less Liabilities 0.2

Mainland China listed companies includes A Share and B Shares. 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. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

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)
12/13/2023 12/14/2023 $0.09054 $0.00000 $0.00000 $0.09054 0.8% N.A.
12/13/2022 12/14/2022 $0.00000 $0.00000 $1.09205 $1.09205 6.8% N.A.
12/14/2021 12/15/2021 $0.05000 $1.52705 $1.62473 $3.20178 12.9% N.A.
12/15/2020 12/16/2020 $0.06025 $0.17213 $0.10568 $0.33806 1.3% N.A.
12/16/2019 12/17/2019 $0.21449 $0.00000 $0.00000 $0.21449 1.1% N.A.

 

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

March 31, 2024

Market Environment

  • Chinese stocks were volatile in the first quarter, and we saw steep falls particularly in some of the smaller indexes. Chinese equities continued to face pressure because of lingering, broad-based concerns including the implications surrounding the late year U.S. elections, deflationary pressures driven by excess capacity, the lack of large-scale policy support for the property sector and the sluggishness in the recovery in consumer demand.
  • Economic recovery has been much weaker than the market expected and there are only incremental signs that China’s property market is beginning to turn a corner.
  • Some of the government’s efforts, however, have started to gain traction, such as initiatives to support the stock market by buying equities and restricting certain stock sales and short selling. These efforts helped stabilize the market in February and supported a short-lived rally.

Contributors and Detractors:

  • For the quarter ended March 31, 2024, the China Fund returned -2.75%, (Investor Class) and -2.76% (Institutional Class) while its benchmark, the MSCI China Index, returned -2.19% over the same period.
  • The top three contributors to relative performance, on a sector basis, were consumer discretionary and industrials due to stock selection, and health care due to an underweight allocation. The top three detractors to relative performance were financials due to stock selection, and communication services and materials due to an underweight allocation.
  • The top three contributors to absolute performance included Meituan, China’s largest food delivery service and internet platform company, China Merchants Bank, a premiere banking franchise, and PetroChina, one of the country’s largest state-owned oil and gas companies. The three largest detractors to performance included Pinduoduo (PDD), a leading e-commerce platform that started its businesses with a focus on lower-tier city, price sensitive consumers, Wuxi Biologics, a pharmaceutical company, and China International Capital Corp., a brokerage firm.

Outlook

  • Looking ahead, the question remains as to whether China’s equity markets are charting a sustainable path of recovery. Notwithstanding the well-known concerns, investor sentiment is improving toward China based upon perceived risk/reward.
  • Marginal year-over-year improvement in earnings expectations combined with stock multiples trading at roughly a 50% discount to February 2021 highs is giving investors confidence that current valuations provide an adequate cushion for unforeseen risks.
  • The calculus suggests that even with little to no improvement in sentiment or stock multiples, consensus estimates in year-over-year earnings growth could lead to attractive equity returns.
  • Thus, we are still in a cautious frame of mind, tinged with some optimism. While last year we think Chinese government policy over promised and underachieved, this year we think the government is seeking to under promise and overachieve. One potentially destabilizing variable on our radar is geopolitics, particularly with the U.S. election approaching. 

 

View the Fund’s Top 10 holdings as of March 31, 2024. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MCHFX as of 03/31/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
-21.77% -20.20% -4.17% 2.45% 7.03% 02/19/1998

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. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.15%

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.

 

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.