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Matthews India Fund
MINDX

Snapshot
  • Unconstrained all-cap strategy focused on companies with a sustainable competitive edge and pricing power, which are able to perform throughout economic cycles
  • Fundamental bottom-up approach to seek well-run entrepreneurial companies with sustainable organic growth and trustworthy managements
  • Bias toward businesses that cater to rising domestic consumer demand and to policy-independent sectors

10/31/2005

Inception Date

7.11%

YTD Return

(as of 06/07/2023)

$23.66

NAV

(as of 06/07/2023)

+0.11

1 Day NAV Change

(as of 06/07/2023)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews India Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. 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 10/31/2005
Fund Assets $607.92 million (05/31/2023)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 41.4%
Benchmark S&P Bombay Stock Exchange 100 Index MSCI India Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.15%

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 India Fund - MINDX
10/31/2005
MINDX
3.19% 8.17% 5.48% 5.96% 20.11% 3.31% 9.21% 9.67%
S&P Bombay Stock Exchange 100 Index
2.30% 8.15% 3.24% 6.49% 22.86% 8.32% 9.50% 10.08%
MSCI India Index
2.96% 8.52% 0.52% 2.19% 20.62% 7.83% 7.77% 8.93%
As of 03/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund - MINDX
10/31/2005
MINDX
1.11% -1.40% -1.40% -6.40% 21.85% 2.26% 8.79% 9.34%
S&P Bombay Stock Exchange 100 Index
1.00% -3.59% -3.59% -6.93% 24.59% 7.22% 8.96% 9.75%
MSCI India Index
1.17% -6.29% -6.29% -11.71% 22.73% 6.40% 7.13% 8.58%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews India Fund - MINDX
MINDX
-9.92% 18.11% 16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90%
S&P Bombay Stock Exchange 100 Index
-4.53% 24.08% 13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

MSCI and MICM are the sources of MSCI India Index performance data.

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 22 funds
  • 3 YEAR
  • out of 22 funds
  • 5 YEAR
  • out of 19 funds
  • 10 YEAR
  • out of 17 funds
  • 1 YEAR
  • 1st
  • 5 out of 23 funds
  • 3 YEAR
  • 2nd
  • 7 out of 22 funds
  • 5 YEAR
  • 4th
  • 18 out of 19 funds
  • 10 YEAR
  • 2nd
  • 7 out of 17 funds
  • SINCE INCEPTION
  • 2nd
  • 1 out of 2 funds

Ratings agency calculation methodology

Portfolio Managers

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Lead Manager

Sharat  Shroff, CFA photo
Sharat Shroff, CFA

Co-Manager

Portfolio Characteristics

(as of 03/31/2023)
Fund Benchmark
Number of Positions 48 101
Weighted Average Market Cap $42.7 billion $60.4 billion
Active Share 51.9 n.a.
P/E using FY1 estimates 23.5x 21.8x
P/E using FY2 estimates 19.5x 18.4x
Price/Cash Flow n.a. 14.2
Price/Book 3.8 3.2
Return On Equity 17.8 18.2
EPS Growth (3 Yr) 15.2% 22.7%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2023)
0.85%
Alpha
0.85
Beta
77.74%
Upside Capture
76.08%
Downside Capture
1.26
Sharpe Ratio
-0.50
Information Ratio
5.49%
Tracking Error
92.12

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2023)
Name Sector % Net Assets
HDFC Bank, Ltd. Financials 7.6
ICICI Bank, Ltd. Financials 6.4
Shriram Finance, Ltd. Financials 5.1
Reliance Industries, Ltd. Energy 4.6
Infosys, Ltd. Information Technology 4.4
Hindustan Unilever, Ltd. Consumer Staples 4.0
Tata Consultancy Services, Ltd. Information Technology 3.6
Axis Bank, Ltd. Financials 3.5
Maruti Suzuki India, Ltd. Consumer Discretionary 3.0
IndusInd Bank, Ltd. Financials 2.9
TOTAL 45.1

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 03/31/2023)
  • Sector Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 35.0 35.3 -0.3
Information Technology 14.4 13.0 1.4
Consumer Discretionary 11.4 7.5 3.9
Consumer Staples 10.7 10.0 0.7
Materials 7.7 8.0 -0.3
Health Care 7.4 3.6 3.8
Industrials 6.9 5.9 1.0
Energy 2.7 10.9 -8.2
Communication Services 0.0 2.7 -2.7
Utilities 0.0 2.6 -2.6
Real Estate 0.0 0.4 -0.4
Cash and Other Assets, Less Liabilities 3.9 0.0 3.9

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) 48.8 67.2 -18.4
Large Cap ($10B-$25B) 12.4 18.9 -6.5
Mid Cap ($3B-$10B) 21.8 13.3 8.5
Small Cap (under $3B) 13.2 0.6 12.6
Cash and Other Assets, Less Liabilities 3.9 0.0 3.9

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 $0.02887 $3.35147 $3.38034 13.0% 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 ending March 31, 2023, the Matthews India Fund returned -1.40% (Investor Class) and -1.33% (Institutional Class), while its benchmark, the S&P Bombay Stock Exchange 100 Index returned -3.59%.

Market Environment:

After 15 months of continuous monetary policy hikes, it seems the central banks are finally beginning to see the intended impact on inflationary headwinds globally. Consumer price inflation reported in the U.S. and in India for the month of March were better than expectations, and it came as no surprise that the Reserve Bank of India decided against further raising rates in its most recent monetary policy meeting. Despite the pause from the central bank, it would be foolhardy to arrive at a conclusion that there might not be further rate hikes.

March’s unseasonal rain along with prediction of El Nino during monsoon months suggest that India’s agricultural output will likely be challenging for the next 12 months which potentially can lead to higher food inflation in coming months. To complicate matters, OPEC (Organization of the Petroleum Exporting Countries) seems determined to see higher oil prices which again implies higher food inflation—which have historically been correlated in India. We are also beginning to gradually see the impact of global slowdown on Indian economy with year-on-year exports declining in the last few months. This coupled with slowdown in consumption in rural India and slowing auto sales has meant that Gross Domestic Product (GDP) growth has been coming down.

India’s government unveiled its budget for fiscal year 2023-2024, with a dramatic increase in infrastructure spending. This bodes well for GDP growth as the spending will likely create more jobs at the bottom of the pyramid.

On the bright side, Indian financial system continues to be resilient. Regional bank failures in the U.S highlighted the prudency that banking regulators in India have demonstrated over the year with respect to uniform guidelines for liquidity regardless of the size of bank. The saga of Adani Group over last three months also highlighted the good work India’s regulators have done with respect to limiting individual group exposure on a particular bank.

Performance Contributors and Detractors:

At the sectoral level, our underweight in energy was the biggest contributor to the Fund’s relative performance. Additionally, our stock selection within industrials, health care and material sectors contributed to the Fund’s relative performance. However, our underweight in utilities and our stock selection within consumer staples detracted from performance.

At individual holdings level, APL Apollo Tubes and Poly Medicure were among the top contributors to Fund performance. APL Apollo Tubes is the largest manufacturer of steel tubes used for construction in India. Its scale, distribution, and spread of stock keeping units (SKUs) are its biggest competitive advantage. APL Apollo recently launched new, innovative products for the first time which aim to bring down the construction time of any building and, in turn, create economic benefit for project owners. Poly Medicure is a medical products company with a predominant portion of its revenues coming from consumables used in health care. Poly Medicure is benefiting from a structural trend in India away from imported medical products in favor of domestically manufactured products.

Conversely, our holdings in Restaurant Brands Asia and in IndusInd Bank negatively impacted our performance. Restaurant Brands is a franchisee of Burger King in India. While there is tremendous opportunity for growth both in terms of same store sales and network expansion, its growth in the last quarter lagged investor expectations. Further, there is a fear that the private equity owner of Restaurant Brands is looking to exit which didn’t bode well for its price performance. IndusInd Bank didn’t perform well on the back of news flow around regional bank failures in the U.S. IndusInd Bank has a relatively weaker deposit franchise compared to its peers so in times of liquidity concerns, it does have a negative impact on IndusInd’s performance.

Notable Portfolio Changes:

We continued to reduce the number of holdings in the portfolio during the quarter and exited several positions, including Delhivery. Delhivery is a logistics services provider and is a new-age technology company with strong growth prospects. While logistics continues to be an exciting space, Delhivery seems to be struggling with internal execution issues. To further compound the problems our interaction with the company suggested that management was unwilling to acknowledge the issues it is facing and seemed to be haughty about its positioning in the market as provider of last resort. Given the lofty valuation, we decided to exit the stock. We also exited Laurus Labs which is one of the largest application programming interfaces (API) manufacturer in India. While Laurus Labs has done well in terms of growing the business, our decision to exit was predicated on the company expanding into too many adjacencies too fast. Given the highly regulated nature of pharma API manufacturing, we think such an approach has the potential to jeopardize their internal pharmacovigilance and compliance practices.

We initiated a position in Nestle India. Nestle global is focusing tremendously in growing its India business. The company has committed to bring new lines of product portfolio to India and committed to dramatically increase new investments in India. Further, Nestle India is also pushing its distribution deeper in smaller towns and villages in the country which is leading to faster than industry growth for the company.

Outlook:

We expect global growth to continue to slow through the course of this year on the back of higher interest rates globally. We also think that given the chatter around de-dollarization, the U.S. Federal Reserve will likely raise rates higher for longer to preserve the reserve currency status for the dollar as much as possible, which can potentially push the U.S into recession and also lead to further slowdown in India.

Amid this macro backdrop, we continue to remain excited about growth prospects in India from a longer-term standpoint. The government’s actions over the past few years and its most recent financial budget is resulting in improved infrastructure across the country and signs of the same are beginning to be visible and felt by common citizens of the country. On a recent visit to India, travel from Delhi to Jaipur which on a four-lane highway cut down the travel time from five hours to three hours between the two large cities. Such productivity gains on the back of infrastructure development should attract more global companies to the country and bodes well for India’s long-term export growth prospects.

While we remain cautious for India’s near-term outlook, we are a little less worried compared to three months ago. Indian markets have underperformed over last six months and we have seen some normalization in valuation. Equity risk premium which was signaling extreme ‘caution’ is also not as bad as it was.

 

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

Average Annual Total Returns - MINDX as of 03/31/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-6.40% 21.85% 2.26% 8.79% 9.34% 10/31/2005

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%

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.