09/15/2008
Inception Date
2.95%
YTD Return
(as of 03/22/2023)
$23.76
NAV
(as of 03/22/2023)
+0.08
1 Day NAV Change
(as of 03/22/2023)
Long-term capital appreciation
Under normal circumstances, the Matthews Emerging Markets Small Companies 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 Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.
These and other risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 09/15/2008 | |
| Fund Assets | $399.58 million (02/28/2023) | |
| Currency | USD | |
| Ticker | MSMLX | |
| Cusip | 577-125-206 | |
| Portfolio Turnover | 27.9% | |
| Benchmark | MSCI Emerging Markets Small Cap Index | |
| Geographic Focus | Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. | |
| Gross Expense Ratio | 1.51% | |
| Net Expense Ratio | 1.35% | |
| Objective | Long-term capital appreciation |
| Strategy | Under normal circumstances, the Matthews Emerging Markets Small Companies 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 Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index. |
| Risks |
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.
The risks associated with investing in the Fund can be found in the prospectus |
Before April 30, 2021, the Fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from the performance shown for periods before that date.
MSCI Emerging Markets Small Cap Index since inception value calculated from 9/15/08.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.
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.
(as of 12/31/2022)
CATEGORY: Diversified Emerging Mkts
| OVERALL | 5 stars | out of 732 funds |
| 3 YEAR | 5 stars | out of 732 funds |
| 5 YEAR | 5 stars | out of 654 funds |
| 10 YEAR | 5 stars | out of 383 funds |
(as of 12/31/2022)
CATEGORY: Emerging Markets Funds
| 1 YEAR | 1st | 129 out of 777 funds |
| 3 YEAR | 1st | 3 out of 695 funds |
| 5 YEAR | 1st | 3 out of 612 funds |
| 10 YEAR | 1st | 2 out of 370 funds |
| SINCE INCEPTION | 1st | 1 out of 203 funds |
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Lead Manager
Portfolio Manager
Vivek Tanneeru is a Portfolio Manager at Matthews Asia and manages the firm’s Emerging Markets Sustainable Future, Emerging Markets Small Companies, Asia Small Companies and Asia Sustainable Future Strategies. Prior to joining Matthews Asia in 2011, Vivek was an Investment Manager on the Global Emerging Markets team of Pictet Asset Management in London. While at Pictet, he also worked on the firm’s Global Equities team, managing Japan and Asia ex-Japan markets. Before earning his MBA from the London Business School in 2006, Vivek was a Business Systems Officer at The World Bank and served as a Consultant at Arthur Andersen Business Consulting and Citicorp Infotech Industries. He interned at Generation Investment Management while studying for his MBA Vivek received his Master’s in Finance from the Birla Institute of Technology & Science in India. He is fluent in Hindi and Telugu.
Co-Manager
Portfolio Manager
Jeremy Sutch is a Porfolio Manager at Matthews Asia and co-manages the firm’s Emerging Markets Small Companies, Asia Small Companies and Asia ex Japan Total Return Equity Strategies. Prior to joining the firm in 2015, he was Director and Global Head of Emerging Companies at Standard Chartered Bank in Hong Kong from 2012 to 2015, responsible for the fundamental analysis of companies in Asia, with a particular focus on small- and mid-capitalization companies. From 2009 to 2012, he was Managing Director at MJP Capital in Hong Kong, which he co-founded. His prior experience has included managing small-cap equities at Indus Capital Advisors and serving as Head of Hong Kong Research for ABN AMRO Asia Securities. Jeremy earned an M.A. in French and History from the University of Edinburgh.
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Investor share class.
Sources: Zephyr StyleADVISOR
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
Not all countries are included in the benchmark index(es).
The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.
The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.
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.
Visit our Glossary of Terms page for definitions and additional information.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
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.
Commentary
Period ended December 31, 2022
For the year ending December 31, 2022, the Matthews Emerging Markets Small Companies Fund returned -16.84% (Investor Class) and -16.66% (Institutional Class), while its benchmark, the MSCI Emerging Markets Small Cap Index, returned -17.54% over the same period. For the fourth quarter, the Fund returned 9.08% (Investor Class) and 9.13% (Institutional Class), while the benchmark returned 8.33%.
Market Environment:
In 2022, the U.S. and many other parts of the developed world saw high rates of inflation that they hadn’t experienced since the 1980s. The U.S. Federal Reserve increased the Fed funds rate seven times last year after guiding for a transitory inflation for much of 2021. This led to strong U.S. dollar performance that peaked around the end of the third quarter. Inflation was less of a challenge in key emerging markets like China, partly because of suppressed economic activity resulting from China’s zero COVID policy which was in place for much of 2022, and because where inflation was elevated, a number of central banks proactively addressed it by sharply increasing rates.
Nonetheless, emerging markets currencies were not completely immune to the impact of a very strong greenback. Among Latin American currencies, the Brazilian real, Mexican peso and Peruvian sol gained over 5% against the dollar in 2022 while the Argentine peso and Turkish lira were the worst performers as a result of runaway inflation. For perspective, some major developed market currencies, such as the Japanese yen, British pound and the euro, fared worse than some emerging-market currencies.
For the year, Turkey was the best performing small-cap emerging markets, followed by Chile and Mexico. Columbia was the worst performer, followed by South Korea and Hungary. In Asia, China and Taiwan also performed poorly. During 2022, MSCI Emerging Markets Small Cap Index comfortably outperformed the broader MSCI Emerging Markets Index.
Performance Contributors and Detractors:
On a country basis, our stock selection in India was the biggest contributor to relative performance during the year, followed by stock selection in Indonesia and underweight allocation to Taiwan and South Korea. On the other hand, our overweight allocation to China as well as our stock selection in Russia detracted from performance. Our underweight to Turkey was also a detractor.
From a sector perspective, our stock selection and overweight in industrials was the biggest contributor to relative performance during the year. Stock selection in consumer discretionary, health care and real estate was also a top contributor. On the flip side, stock selection in information technology and financials were the biggest detractors from relative performance.
At the stock level, our Indian holdings benefited from the normalization of economic activity in the country. Lemon Tree Hotels and Phoenix Mills, a retail mall operator, were top contributors as they gained from higher sales and stronger pricing, respectively, compared with pre-pandemic levels. Shriram Finance, an Indian non-banking financial company, also benefited from economic normalization and loan growth resumption. In Indonesia, as the economy as well as mall foot traffic normalized, Mitra Adiperkasa, a retailer with a broad exposure to discretionary consumer spending, was also a top performer. On the other hand, Taiwan technology holding Silergy was the largest detractor. Concerns over a post-COVID global consumer softening in demand for consumer appliances and communications products, in addition to general weakness in Chinese economic activity, proved to be a drag on stock performance. The broader build up in semiconductor inventory globally also contributed to negative sentiment toward the technology sector in general. We continue to like the long-term prospects of Silergy and its positioning in the analog semiconductor industry.
Notable Portfolio Changes:
In the last quarter we initiated a new position in Tongcheng Travel Holdings, a Chinese online travel agency. We expect the company to benefit from a recovery in tourism as well as easing mobility restrictions in China. Higher savings and pent-up demand for travel after a long period of China’s zero-COVID policy should aid demand. The company has a strong lower-tier presence and China business. It has been making concerted efforts to increase its exposure to the international package travel area and while that is a relatively smaller proportion of its business, these efforts should aid further growth over the long term.
Outlook:
The Fed’s interest rate strategy and the market’s expectation of its evolution continue to be the most important variables impacting the near-term regional, sector and currency performance in emerging markets. We expect the impact of Fed’s actions in 2023 to be less than it was in 2022 as the tightening cycle enters late stages. In addition, we are also wary of the cumulative impact of the Fed’s interest rate hikes on U.S. and developed world economic activity.
Our other key focus in 2022 was the evolution of China’s zero-COVID policy and its impact on economic activity in the country. This has largely been resolved given the unexpected lifting of most COVID restrictions in China in late 2022. Elsewhere, Russia’s invasion of Ukraine and its effect on energy prices— alongside OPEC’s efforts to keep the prices high—needs careful watching, especially as Chinese economic activity is likely to pick up as 2023 progresses.
Over the coming years, we expect the emerging markets gross domestic product (GDP) growth-differential with developed markets to improve from a 23-year low reached in 2022. This development, alongside relatively attractive valuations, should potentially lend support to better equity performance against developed markets compared with the last decade.
As the global economy embarks on a likely tricky 2023, we believe small companies in emerging markets will continue to offer long-term growth opportunities given their innovation and domestic consumption orientation. There are also currently quality businesses at attractive valuations in this asset class.
Top 10 holdings as of December 31, 2022. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MSMLX as of 12/31/2022
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
Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2023. Please see the Fund’s prospectus for additional details.
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.