09/15/2008
Inception Date
-15.31%
YTD Return
(as of 08/09/2022)
$25.34
NAV
(as of 08/09/2022)
+0.03
1 Day NAV Change
(as of 08/09/2022)
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 | $353.40 million (07/31/2022) | |
| Currency | USD | |
| Ticker | MSMLX | |
| Cusip | 577-125-206 | |
| Portfolio Turnover | 50.8% | |
| 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 06/30/2022)
CATEGORY: Pacific/Asia ex-Japan Stk
| OVERALL | 5 stars | out of 54 funds |
| 3 YEAR | 5 stars | out of 54 funds |
| 5 YEAR | 5 stars | out of 49 funds |
| 10 YEAR | 5 stars | out of 36 funds |
(as of 06/30/2022)
CATEGORY: Emerging Markets Funds
| 1 YEAR | 1st | 43 out of 782 funds |
| 3 YEAR | 1st | 2 out of 702 funds |
| 5 YEAR | 1st | 3 out of 605 funds |
| 10 YEAR | 1st | 3 out of 346 funds |
| SINCE INCEPTION | 1st | 1 out of 204 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 Portfolio Manager at Matthews Asia and co-manages the firm’s Emerging Markets Small Companies and Asia Small Companies 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 Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
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 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 June 30, 2022
For the first half of 2022, the Matthews Emerging Markets Small Companies Fund returned -18.32% (Investor Class) and -18.21% (Institutional Class), while its benchmark, the MSCI Emerging Markets Small Cap Index, returned -19.85% over the same period. For the quarter ending June 30, 2022, the Fund returned -8.09% (Investor Class) and -8.02% (Institutional Class), while the benchmark returned -16.28%.
Market Environment:
There were mixed fortunes for emerging markets in the first half of the year. Higher-than-expected inflation reads in the U.S. and European Union led the market to anticipate a steeper rate hike cycle. The Fed hiked its rate by 75 basis points (0.75%) in its June meeting, the first such move in almost three decades. Also attendant was the view that the steeper pace of tightening may lead to recession. With no end in sight to the Russian invasion of Ukraine, prices in the oil and gas markets remained elevated notwithstanding periodic pullbacks over recessionary concerns.
Still, in China, after several quarters, sentiment has turned a corner with the expectation that regulatory risk has peaked and the Chinese government is taking a more pragmatic approach to its zero COVID policy and aiding economic activity through a stimulus package. In Latin America, Colombia elected its first ever left-leaning president, solidifying gains for the left in the region following victories for left-leaning candidates in Chile and Peru.
Turkey and Kuwait were the strongest performing markets in the first six months of the year, while Egypt and Hungary were the worst. During the second quarter, Turkey and United Arab Emirates were the strongest while Hungary and Brazil were the biggest laggards.
In the second quarter, all major investable emerging market currencies weakened against a surging U.S. dollar. Currencies of commodity-exporting countries such as Chile, South Africa and Brazil that appreciated strongly in the first quarter gave up some of those gains during the second quarter. During the second quarter the Chilean peso depreciated the most followed by the Hungarian forint and the Turkish lira.
Performance Contributors and Detractors:
India, Vietnam and South Korea were major contributors to relative performance during the first half of the year. India’s contribution was driven by stock selection while the portfolio benefited from being overweight Vietnam and underweight South Korea. On the other hand, our underweight and stock selection in Taiwan was the biggest detractor.
From a sector perspective, stock selection in Industrials and consumer discretionary were the biggest drivers of performance in the first half, while stock selection in information technology and financials detracted from performance.
Turning to individual stocks, Ginlong Technologies, a Chinese solar inverter manufacturer, was the biggest contributor to the Fund’s absolute and relative performance in the first six months. Ginlong continues to benefit from the strong growth in the underlying demand for solar power globally and from distributed solar power in particular. The company’s strong performance stemmed from both domestic and overseas markets and it gained further market share. Looking ahead we see strong demand prospects for solar power on the back of reduced raw material pricing pressures in the supply chain compared to last year. This should benefit the company alongside the progress it is making in the commercial and industrial space as well as with utility projects and storage inverters. On the other hand, technology holdings such as Silergy, Formosa Sumco Technology, and Andes Technology detracted from performance due to rotation away from companies that derive a significant part of their value from growth in the long term. Such stocks face a headwind in a sharply rising interest-rate environment and near-term concerns about the semiconductor demand outlook in light of growing worries about softness in economic growth.
Notable Portfolio Changes:
During the second quarter we initiated positions including Hainan Meilan International Airport, a leading operator that serves Haikou, the capital city of Hainan island province in China. Hainan island is a major tourist destination in China and Haikou airport is a major gateway to the island. We expect the pent-up domestic tourism demand to be strong as China’s government takes a more pragmatic approach to implementing its zero COVID policy while outbound international tourism take off might be a few quarters away pending large-scale mRNA vaccination rollout in China. Meilan Airport has a strong duty-free revenue exposure given it has China’s largest duty-free store area and is expected to benefit from the opening of a new terminal that doubled the airport’s passenger handling capacity both from aeronautical and non-aeronautical revenue lines. The stock was available at very attractive valuations amid COVID-19 related lockdowns in Shanghai and Beijing during the quarter.
We exited positions such as Hua Hong Semiconductor—which was a source of cash to fund other promising ideas—and GMR Power and Urban Infra, a stub holding as a result of a de-merger from an airport operator.
Outlook:
The pace and scope of the Fed’s interest-rate hikes and quantitative tightening and the market’s expectation of its evolution remain the most important variables to watch and will have near-term implications for regional, sector and style performance. Russia’s invasion of Ukraine and its impact on energy prices also needs careful monitoring.
Overall, the impact of weak external balances and strongly depreciating currencies in addition to rampant inflation in soft and industrial commodities and energy have led to severe stress in frontier countries like Sri Lanka. But generally, larger emerging markets seem to be reasonably well placed to weather the storm. We believe there is sufficient liquidity in emerging markets in general and that there are early signs of the rate hiking cycle coming to a potential close in commodity-orientated markets like Brazil. In many parts of the emerging markets, the COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters led by a pickup in the services sector.
From a portfolio standpoint, we will look to maintain a balance between growth and value exposure while staying broadly diversified across sectors and countries. We remain watchful about the impact of input inflation and potentially slower economic growth on corporate earnings for the rest of the year and into 2023. Barring another serious pandemic wave or a major recession, we believe small companies are poised to grow and are available at attractive valuations.
View the Fund’s Top 10 holdings as of June 30, 2022. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MSMLX as of 06/30/2022
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.