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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

-5.54%

YTD Return

(as of 12/01/2022)

$26.61

NAV

(as of 12/01/2022)

-0.08

1 Day NAV Change

(as of 12/01/2022)

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 $631.75 million (10/31/2022)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 42.5%
Benchmark S&P Bombay Stock Exchange 100 Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.10%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 10/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund - MINDX
10/31/2005
MINDX
0.79% -2.46% -9.73% -11.75% 6.96% 3.22% 9.04% 9.69%
S&P Bombay Stock Exchange 100 Index
3.01% 0.96% -4.89% -5.73% 11.02% 7.30% 9.34% 10.21%
As of 09/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund - MINDX
10/31/2005
MINDX
-3.74% 5.17% -10.44% -12.74% 7.96% 3.85% 8.71% 9.69%
S&P Bombay Stock Exchange 100 Index
-5.60% 6.85% -7.66% -9.07% 11.06% 8.15% 8.66% 10.07%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews India Fund - MINDX
MINDX
18.11% 16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90% 31.54%
S&P Bombay Stock Exchange 100 Index
24.08% 13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70% 28.62%

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 09/30/2022)

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 21 funds
  • 3 YEAR
  • out of 21 funds
  • 5 YEAR
  • out of 18 funds
  • 10 YEAR
  • out of 17 funds
  • 1 YEAR
  • 2nd
  • 11 out of 23 funds
  • 3 YEAR
  • 3rd
  • 16 out of 21 funds
  • 5 YEAR
  • 4th
  • 17 out of 18 funds
  • 10 YEAR
  • 2nd
  • 7 out of 17 funds
  • SINCE INCEPTION
  • n.a.
  • 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 09/30/2022)
Fund Benchmark
Number of Positions 51 101
Weighted Average Market Cap $40.5 billion $59.2 billion
Active Share 53.6 n.a.
P/E using FY1 estimates 24.1x 21.2x
P/E using FY2 estimates 19.8x 18.1x
Price/Cash Flow n.a. 14.3
Price/Book 4.1 3.3
Return On Equity 16.4 18.1
EPS Growth (3 Yr) 7.9% 22.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2022)
-2.19%
Alpha
0.96
Beta
76.94%
Upside Capture
88.96%
Downside Capture
0.30
Sharpe Ratio
-0.49
Information Ratio
6.36%
Tracking Error
93.52

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 10/31/2022)
Name Sector % Net Assets
ICICI Bank, Ltd. Financials 7.1
HDFC Bank, Ltd. Financials 6.9
Bajaj Finance, Ltd. Financials 5.3
Infosys, Ltd. Information Technology 5.1
Shriram City Union Finance, Ltd. Financials 3.8
Tata Consultancy Services, Ltd. Information Technology 3.8
Reliance Industries, Ltd. Energy 3.6
Hindustan Unilever, Ltd. Consumer Staples 3.6
Axis Bank, Ltd. Financials 3.6
Maruti Suzuki India, Ltd. Consumer Discretionary 3.5
TOTAL 46.3

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 09/30/2022)
  • Sector Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 38.3 34.3 4.0
Consumer Discretionary 14.7 7.7 7.0
Information Technology 11.2 12.4 -1.2
Industrials 8.9 6.2 2.7
Consumer Staples 8.7 9.8 -1.1
Materials 6.5 8.2 -1.7
Health Care 5.8 3.8 2.0
Energy 3.4 11.0 -7.6
Communication Services 0.6 3.0 -2.4
Utilities 0.0 3.4 -3.4
Real Estate 0.0 0.4 -0.4
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.

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 48.1 68.2 -20.1
Large Cap ($10B-$25B) 10.9 19.1 -8.2
Mid Cap ($3B-$10B) 25.5 12.6 12.9
Small Cap (under $3B) 13.7 0.0 13.7
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)
12/14/2021 12/15/2021 $0.00000 $0.26431 $2.55767 $2.82198 9.2% 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 September 30, 2022

For the third quarter ended September 30, 2022, the Matthews India Fund returned 5.17% (Investor Class) and 5.20% (Institutional Class), while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned 6.85%.

Market Environment:

Despite steep monetary policy-tightening by the U.S. Federal Reserve this year, inflation continues to be very sticky implying the Fed will have no choice but to continue down its rate-rising path. This environment is creating very high volatility in both developed and emerging-market currencies, including India’s.

Given the swift depreciation of the euro and the British pound recently, it’s fair to expect that some of the nations that export to these economies are going to be negatively impacted as purchasing power in the Western bloc erodes over time. Europe is also far behind in its monetary policy journey compared with the Fed and it needs to do far more to tame inflationary pressures. The fiscal and monetary policies of Britain further complicate the situation after the government’s tax-cutting stimulus plan alarmed investors and caused the Bank of England to intervene to stabilize gilt yields.

In the face of these global macro challenges India continues to be very resilient. A separate concern has been the impact of an erratic monsoon that has disrupted Kharif, the traditional second harvest of the year. Sowing recovered late in the quarter, however, it’s not clear if the crop yields will be of the usual standard.

Better news has been that the prices of many hard and soft commodities have corrected substantially year-over-year and this will provide support to consumption going forward not just in India but globally.

And despite rising interest rates, auto and real estate sales have been fairly robust as both sectors are recovering from multi-year slowdowns and there is good pent-up demand coming back into the market. We are also seeing job growth in the services sector as COVID concerns recede and mobility begins to normalize. The travel and hospitality industry, particularly, seems to have returned to pre-COVID volumes which is leading to strong employment generation.

Performance Contributors and Detractors:

At the sector level, our underweight in energy was the biggest contributor to relative performance in the quarter as energy firms generally were hurt by a correction in the price of oil from very high levels. Our allocation and stock selection within consumer discretionary was also a top contributor as consumer demand in India remained robust. On the other hand, our stock selection within industrials and financials were the biggest detractors to performance. The negative impact of our stock selection was mitigated to a degree by overweight positions in both sectors, particularly financials.

At an individual holdings level, among the top contributors to performance in the quarter were IndusInd Bank and Lemon Tree Hotels. IndusInd Bank, a commercial lender, has benefited from an improvement in growth outlook and credit costs for key lending verticals like autos and microfinance. Lemon Tree Hotels is gaining from normalization in travel which is leading to occupancy levels returning to pre-COVID numbers. There’s also a supply-demand mismatch in the travel and leisure industry which is creating disproportionate pricing power for hoteliers and leading to a sharp recovery in average rental revenues. Given the high fixed-cost nature of the business there’s a high probability of continued positive surprise to earnings—and not just for Lemon Tree Hotels but for the hospitality industry in general.

Conversely, information technology (IT) stocks were among the biggest detractors in the quarter, as companies including Tata Consultancy Services and Infosys were hurt by softening demand from clients in Western economies. Bandhan Bank was also a big detractor. The floods in the northeastern state of Assam and the less-than-normal rainfall in states like Bihar and West Bengal will have an adverse impact on credit quality for the bank in the short term. Bandhan is also going slow on growing its microfinance book which implies growth in profits may be behind FY23 expectations.

Notable Portfolio Changes:

Amid the rising interest rate environment our recent focus has been to reduce exposure to small caps and consolidate exposure to companies we believe will deliver higher growth for a longer period. To this end, we exited Quess Corp., an outsourcing services provider, and Zydus Wellness, which offers nutrition and skincare products—both small caps and businesses in which we had concerns about management execution and governance. We also exited Divis Laboratories, a pharma company, and Birlasoft, an IT business. We think both companies will face growth challenges and their valuations aren’t reflecting this.

We also initiated a position in Titan in the quarter. With its exposure to jewelry and high-end watches, Titan is one of the few luxury brands in India and we believe it’s well positioned to benefit from discretionary consumption. We expect the company to show sustained growth over the long term which, to a certain degree, justifies the stock’s current high valuation.

Outlook:

We believe that prices have peaked globally and it’s only a matter of time before reported inflation numbers start to come down. Prices of most globally traded hard and soft commodities have fallen from their highs even though they continue to be significantly above levels seen 12 months ago. The Chinese government is also introducing measures to stimulate its economy which will help to ease global supply chain-inflationary pressures. It all suggests to us that the pace of monetary policy tightening globally is set to slow even if the process of tightening is prolonged.

For India’s economy, energy costs continue to pose the main threat to a cyclical recovery. High oil prices together with weaker exports to Europe and U.K. are going to create a wider current account deficit than most economists expect, in our view, which in turn will lead to further rupee depreciation against the U.S. dollar. Against this backdrop, however, India’s economic data continues to be strong. We have seen a consistent pickup in credit growth over the past recent months, indicating a broad-based economic recovery.

Our biggest concern for India equities is valuation. Monetary policy tightening over the last six months has meant that the equity risk premium—the excess return that investing in the stock market may provide over a risk-free rate—has compressed dramatically. With the near-term outlook suggesting further rate hikes ahead the only way for normalized levels of equity risk premium to return is for markets to correct. Hence we have a cautious outlook.

Top 10 holdings as of September 30, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MINDX as of 09/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-12.74% 7.96% 3.85% 8.71% 9.69% 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 1.10%

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.